The net return is calculated as the sum of price appreciation and coupon income, minus the financing cost, divided by the initial price.

• Initial Price ($P_0$): USD 98
• End Price ($P_1$): USD 101
• Coupon Income (6 months): The annual coupon is 8%, so for 6 months, it pays $(8\% \times 100) / 2 = \text{USD } 4$
• Financing Cost: The bond is financed at 3% per annum. For 6 months, the cost is $98 \times 3% \times 0.5 = \text{USD } 1.47$

Net Profit: $\text{Profit} = (P_1 - P_0) + \text{Coupon} - \text{Financing Cost}$ $\text{Profit} = (101 - 98) + 4 - 1.47 = 3 + 4 - 1.47 = 5.53$

Net Return: $\text{Net Return} = \frac{\text{Profit}}{\text{Initial Price}} = \frac{5.53}{98} = 0.056428 \text{ or } 5.64\%$