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Jack purchased a bond today with a 20-year maturity and a yield to maturity (YTM) of 8%. The coupon rate is 5% and coupons are
Jack purchased a bond today with a 20-year maturity and a yield to maturity (YTM) of 8%. The coupon rate is 5% and coupons are paid annually. The par value is $1,000. Jack is going to hold this bond for 2 years and sell the bond at the end of year 2. The bond's yield to maturity will change to 9% at the time when Jack sells the bond. Assume coupons can be reinvested in short term securities over the next 2 years at an annual rate of 12%.
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To calculate Jacks annual return on this bond investment we need to consider the coupon payments reinvestment of coupons and the change in the bonds y...
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
