Description
Robert Corp. has forecasted its bond portfolio value for one year ahead to be $ 200 million. In one year, it expect`s to receive $5,000,000 in coupon payments. The bond portfolio today is worth $ 75 million. What is the forecasted return of this bond portfolio?
Answer
Value of bond portfolio today = $75 million.
Value of portfolio after one year = $200 million
Coupon receive = $5 million
Forecasted return = ($200 + $5 – $75) / $75
= ($205 – $75)/ $75
= $130 / $75
= 173.33%
Forecated return in one year will be 173.33%.
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