I was reading a book about debt securities and bonds. There is a way given in the book that calculates HPR of the bond.

If an investor purchases a bond at Rs. 104, earns Rs. 8 as coupon, which he reinvests at 7% for a period of 1 year, and finally sells the bond at Rs. 110 after 1 year then his HPR would be: HPR = [(8) + (8 * 7%) + (110-104)]/ 104 = 14.00%

What i don't under stand is this part :

[(8) + (8 * 7%)

Why is that 7% interest rate is multiplied with 8 and why '8' is added to it ?


It states that RS 8 was received as payout by bond. Reinvest RS 8 at 7% interest.

So total money received is RS 8 plus 7% interest on RS 8 plus profit from sale of bond

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.