A year ago, you bought a bond with a coupon rate of 5.4%, just after it paid its semiannual coupon. The bond had 23 years to maturity, a face value of $1,000 and a yield to maturity of 3.4%. Shortly after buying the bond, yields changed to 4.5%. You reinvested the first coupon at the new market interest rate. What is your realized yield if you sell the bond now, one year after buying it?
A year ago, you bought a bond with a coupon rate of 5.4%, just after it paid its semiannual coupon. The bond had 23 years to maturity, a face value of $1,000 and a yield to maturity of 3.4%. Shortly after buying the bond, yields changed to 4.5%. You reinvested the first coupon at the new market interest rate. What is your realized yield if you sell the bond now, one year after buying it?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A year ago, you bought a bond with a coupon rate of 5.4%, just after it paid its semiannual coupon. The bond had 23 years to maturity, a face value of $1,000 and a yield to maturity of 3.4%.
Shortly after buying the bond, yields changed to 4.5%. You reinvested the first coupon at the new market interest rate. What is your realized yield if you sell the bond now, one year after buying it?
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