Question
On January 2020 you buy a 10-year coupon bond with coupon payments of $10,000 per year and a final value of $100,000. The yield to
On January 2020 you buy a 10-year coupon bond with coupon payments of $10,000 per year and a final value of $100,000. The yield to maturity of this bond is 10 percent. On January 2021 you collect your first coupon and sell the bond in the bond market.
1) On January 2021 the yield to maturity of this bond decreases to 8 percent. Therefore, your one-year holding period rate of return equals _________ percent, consisting of _________ percent current yield and __________ percent capital gain rate.
2) On January 2021 the yield to maturity of this bond increases to 11 percent.
Therefore, your one-year holding period return equals ___________ percent.
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