You bought a bond five years ago for $909 per bond. The bond is now selling for $964. It also paid $65 in interest per year. 

Calculate the realized rate of return earned on this bond.

To calculate the realized rate of return on a bond, we use the formula for the total return over the holding period:

\[
\text{Realized Rate of Return} = \frac{\text{Total Gain from Bond}}{\text{Initial Price of Bond}} \times 100
\]

The total gain from the bond is the sum of the interest earned and the capital gain (or loss) over the holding period. Here's how we calculate each component:

### 1. Interest Earned:
You earned $65 per year in interest for 5 years. The total interest is:
\[
\text{Total Interest} = 65 \times 5 = 325
\]

### 2. Capital Gain:
The capital gain is the difference between the selling price of the bond and the initial price:
\[
\text{Capital Gain} = 964 - 909 = 55
\]

### 3. Total Gain:
The total gain from the bond is the sum of the interest earned and the capital gain:
\[
\text{Total Gain} = 325 + 55 = 380
\]

### 4. Realized Rate of Return:
Now, divide the total gain by the initial price of the bond and multiply by 100 to get the percentage return:
\[
\text{Realized Rate of Return} = \frac{380}{909} \times 100 \approx 41.81\%
\]

So, the realized rate of return on the bond is approximately **41.81%** over the 5-year holding period.

Would you like any further details on how this calculation works?

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Here are some related questions to think about:

1. How does the length of the holding period affect the realized rate of return?
2. What if the bond's selling price had decreased instead of increased? How would that change the return?
3. How would inflation affect the real rate of return on this bond?
4. What if the bond had a different interest rate? How would it affect the realized return?
5. How does this bond's return compare to returns on stocks or other investments over the same period?

**Tip:** Always consider both interest payments and capital gains when calculating the return on bonds.

You bought a bond five years ago for $909 per bond. The bond is now selling for $964. It also paid $65 in interest per year. Calculate the realized rate of return earned on this bond.

Learn how to calculate the realized rate of return on a bond you bought for $909, sold for $964 after 5 years, and earned $65 in interest per year. This guide includes step-by-step calculations for interest earned, capital gain, and total return. Ideal for students in finance courses or advanced high school economics classes.

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