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Assume that you purchase a 3-year R1 000 par value bond, with an 8% coupon, and a yield of 10%. After you purchase the bond,
Assume that you purchase a 3-year R1 000 par value bond, with an 8% coupon, and a yield of 10%. After you purchase the bond, one-year interest rates are as follow, year 1 = 10%, year 2 = 8%, year 3 = 6% (these are the reinvestment rates). Calculate the realised compound or horizon yield if you hold the bond to maturity. Interest is paid annually. 1. 7.28% 2. 8.37% 3. 9.76% 4. 10.67%
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