Show that if yield to maturity increases, then holding-period return is less than initial yield. For example,
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Show that if yield to maturity increases, then holding-period return is less than initial yield.
For example, suppose in Example 14.8 that by the end of the first year, the bond’s yield to maturity is 8.5%. Find the 1-year holding-period return and compare it to the bond’s initial 8% yield to maturity.
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