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Assume a three-year bond that pays a 10% coupon.It has a yield to maturity Y = .20%, so R = .2.Considering PAR = 1000, first
Assume a three-year bond that pays a 10% coupon.It has a yield to maturity Y = .20%, so R = .2.Considering PAR = 1000, first get the bond price. Suppose now that the owner of the bond decides to sell it in the secondary market after receiving the first coupon. What is the return on the investment if interest rate increases to R=25% ? What is the return on the investment if interest rate decreases to R=15% ?
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