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28 Sep 2019
The YTM on a bond is the interest rate you earn on your investment if interest rates donât change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).
a. Suppose that today you buy a bond with an annual coupon of 9 percent for $1,110. The bond has 16 years to maturity. What rate of return do you expect to earn on your investment?
b-1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for?
b-2. What is the HPY on your investment?
The YTM on a bond is the interest rate you earn on your investment if interest rates donât change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).
a. | Suppose that today you buy a bond with an annual coupon of 9 percent for $1,110. The bond has 16 years to maturity. What rate of return do you expect to earn on your investment?
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Collen VonLv2
28 Sep 2019