Question
Suppose you purchase a 30-year zero-coupon bond with a yield to maturity of 6.2%. You hold the bond for five years before selling it. a.
Suppose you purchase a 30-year zero-coupon bond with a yield to maturity of 6.2%. You hold the bond for five years before selling it.
a. If the bond's yield to maturity is 6.2% when you sell it, what is the rate of return of your investment?
b. If the bond's yield to maturity is 7.2% when you sell it, what is the rate of return of your investment?
c. If the bond's yield to maturity is 5.2% when you sell it, what is the rate of return of your investment?
d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain.
(second time posting this question, last time the answerer thought it was multiple choice, please note its NOT and its a four mark question, thankyou :) )
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