Suppose you buy a 10 percent coupon bond today for $1,100. The bond has 10 years to
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Suppose you buy a 10 percent coupon bond today for $1,100. The bond has 10 years to maturity. What rate of retum do you expect to earn on your investment? Two years from now, the YTM on your bond has declined by 2.5 percent, and you decide to sell. What price will your bond sell for? What is the realized yield on your investment? Compare this yield to the YTM when you first bought the bond. Why are they different?
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