Question
1. Assume that the next year, with 5 years to maturity, your bond is selling for $1,112 and the YTM is equal to 4%. Assume
1. Assume that the next year, with 5 years to maturity, your bond is selling for $1,112 and the YTM is equal to 4%. Assume that the YTM on this bond will remain at 4% over the next year. You will earn part of your 4% total return (YTM) from receiving your coupon payments over the year (and reinvesting the first one.) What is the other part of your total return for the year? Put another way, explain how you earn the other part of your return, to bring your total return (YTM) to equal 4%. Be specific. (No calculations are necessary, you can answer this in 1-2 sentences.)
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