Answered: What is the YTM of this bond today?…

What is the YTM of this bond today? Suppose the annual reinvestment rate is 8% for the next two years. What is the realized compound yield if you sell this bond at the end of year 2?

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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Question

You purchase a 3-year coupon bond at the par value today.
The information of this coupon bond is shown below:
annual coupon rate: 10%
face value: $1,000
What is the YTM of this bond today?
Suppose the annual reinvestment rate is 8% for the next two years. What is the
realized compound yield if you sell this bond at the end of year 2?
O a. 10 % ; 10.75%
O b. 10%; 10%
O c. 10.75%; 10.75%
O d. 8%; 9%
k

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