Question
Return on a coupon bond investment You buy a coupon bond with a face value F = $100, 20 years until maturity, an annual coupon
Return on a coupon bond investment
You buy a coupon bond with a face value F = $100, 20 years until maturity, an annual coupon rate of 11.50% and a yield to maturity y = 9.00%. Coupons are paid monthly, i.e. at the end of each month until the maturity of the bond. 2 years later, the yield to maturity of the bond has moved to 6.60%. What is the holding period percentage return on your investment if you then sell the bond? Please, assume that you donate the coupons to charity and therefore, ignore the receipt of those payments when computing the return.
A. 29.96% B. 20.74% C. 25.35% D. 23.05%
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