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Suppose you buy a 20-year, 5 percent bond that has an original price of $1,000. In 5 years, you expect the yield on 15-year, 5
Suppose you buy a 20-year, 5 percent bond that has an original price of $1,000. In 5 years, you expect the yield on 15-year, 5 percent bonds to be 4 percent. Calculate your total return on the 20-year bond if you were to buy it today, hold it for 5 years, and then sell it when it is a 15-year bond. Assume you reinvested the coupon payments you received at 5 percent, and you receive annual coupon payments.
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