Assume you have a 1 year investment horizon. A bond has 10% year coupon rate and pays the coupon once per year. The bond matures in 10 years and is priced to yield 8% this year. If you expect the yield to maturity on the bond to be 7% at the beginning of the next year, what is your holding period return, assuming you have received the coupon for this year.
Assume you have a 1 year investment horizon. A bond has 10% year coupon rate and pays the coupon once per year. The bond matures in 10 years and is priced to yield 8% this year. If you expect the yield to maturity on the bond to be 7% at the beginning of the next year, what is your holding period return, assuming you have received the coupon for this year.
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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Transcribed Image Text:Assume you have a 1 year investment horizon. A bond
has 10% year coupon rate and pays the coupon once
per year. The bond matures in 10 years and is priced to
yield 8% this year. If you expect the yield to maturity on
the bond to be 7% at the beginning of the next year,
what is your holding period return, assuming you have
received the coupon for this year.
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