Its years ago, you boughta 10-year, 6% turity was 8%. Right after you purchased this bond, the yield-to-maturity on this bo 9% and stayed at the same level in the next two years. You reinvested the coupon p emarket rate of 9%. You just sold the bond at 9% yield-to-maturity. What is your an ding period return? What is your capital gain/loss? Note: Remember that capital ga coupon payment mnuted with respect to the price on the constant price-vield troiectory

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
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Two years ago, you bought a 10-year, 6% semiannual coupon payment bond when its yield-to-
maturity was 8%. Right after you purchased this bond, the yield-to-maturity on this bond increased
to 9% and stayed at the same level in the next two years. You reinvested the coupon payments at
the market rate of 9%. You just sold the bond at 9% yield-to-maturity. What is your annualized
holding period return? What is your capital gain/loss? Note: Remember that capital gains/losses are
computed with respect to the price on the constant price-yield trajectory.
Transcribed Image Text:Two years ago, you bought a 10-year, 6% semiannual coupon payment bond when its yield-to- maturity was 8%. Right after you purchased this bond, the yield-to-maturity on this bond increased to 9% and stayed at the same level in the next two years. You reinvested the coupon payments at the market rate of 9%. You just sold the bond at 9% yield-to-maturity. What is your annualized holding period return? What is your capital gain/loss? Note: Remember that capital gains/losses are computed with respect to the price on the constant price-yield trajectory.
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