In 2016, German 10-year government bond investors faced a price of EUR100.50 per EUR100 principal and an

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In 2016, German 10-year government bond investors faced a price of EUR100.50 per EUR100 principal and an annual YTM of −0.05 percent at issuance. That is, the German 10-year government bond was initially priced by the market to provide a negative return to the investor. Six years later, these bonds traded at a price (PV) of EUR95.72 per EUR100 principal. 

1. What was the initial investor’s implied return on this bond over the six-year holding period? 

2. What is the expected return of an investor who purchases the discount bond at EUR95.72 and holds it for the remaining four years? 


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