Exxon Mobil 20-year bonds pay 9 percent interest annually on a $1,000 par value. If bonds sell at $945, what i?

Exxon Mobil 20-year bonds pay 9 percent interest annually on a $1,000 par value. If bonds sell at $945, what is the bonds’ expected rate of return

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  • 9 years ago
    Best Answer

    I don't think you are going to see an Exxon Mobile bond with a 9% interest rate ever sell at a discount in the foreseeable future.

    But just hypothetically, if you could buy such a bond and it would have the full 20 years to run until redemption, the calculation would be as follows:

    Annual interest: $90

    Annual amortization of purchase discount: $55/20yrs. = $2.75

    Total annual return: $92.75

    Annual Yield: 92.75/945 = 9.788%

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