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At time t = 0, in the bond market you observe a regular coupon bond with following characteristics: Face value: $1,000.00; Maturity: 7 years; Coupon
At time t = 0, in the bond market you observe a regular coupon bond with following characteristics: Face value: $1,000.00; Maturity: 7 years; Coupon payments: $80 payable yearly. The market interest rate /your required rate of return/yield to maturity is 8.61777%, continuously compounded. Suppose that during the rst year after you purchase the bond, the market interest rate has decreased to 8.000%, annually compounded. You decided to sell the bond at the end of year 1 (t = 1). What will be your continuously compounded holding period return?
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