Question
The bond has a face value of $1000 and is bought at par with a coupon rate of 5%. After one year, the market yield
The bond has a face value of $1000 and is bought at par with a coupon rate of 5%. After one year, the market yield on the bond changes to 9 %.
| Yrs to maturity | Initial curr yield | Initial P(t) | P(t+1) | Capital Gain | Rate of Return |
| 1 | 0.05 | 1000 | 1000.000 | 0.000 | 0.05 |
| 2 | 0.05 | 1000 |
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| 3 | 0.05 | 1000 |
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| 5 | 0.05 | 1000 |
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| 7 | 0.05 | 1000 |
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The bond has a face value of $1000 and is bought at par with a coupon rate of 9%. After one year, the market yield on the bond changes to 5%.
| Yrs to maturity | Initial curr yield | Initial P(t) | P(t+1) | Capital | Rate Of Return |
| 1 | 0.09 | 1000 | 1000.000 |
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| 2 | 0.09 | 1000 |
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| 3 | 0.09 | 1000 |
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| 5 | 0.09 | 1000 |
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| 7 | 0.09 | 1000 |
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