To calculate the total return earned by the bond, we use the following formula:

$\text{Total Return} = \text{Face Value} \times \text{Annual Interest Rate} \times \text{Term to Maturity}$

Given:

• Face Value: $7000
• Annual Interest Rate: 5.5% = 0.055
• Term to Maturity: 3 years

Calculation:

$\text{Total Return} = 7000 \times 0.055 \times 3$ $\text{Total Return} = 7000 \times 0.165$ $\text{Total Return} = 1155$

Final Answer:

The total return earned by this bond is $1155.

Would you like further clarification or details on this calculation?

Related Questions:

1. How would the total return change if the interest rate was compounded annually instead of being simple interest?
2. What is the face value required to earn a total return of $1500 over the same term?
3. How does the term to maturity affect the total return calculation?
4. Can the interest rate be variable during the bond's term, and how would that impact the return?
5. What happens to the bond's total return if it's redeemed before maturity?

Tip:

Always check if the interest is compounded or simple to use the correct formula for return calculation!