Question
The YTM on a bond is the interest rate you earn on your investment if interest rates dont change. If you actually sell the bond
The YTM on a bond is the interest rate you earn on your investment if interest rates dont change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 12 percent for $1,140. The bond has 19 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. Two years from now, the YTM on your bond has declined by 1 percent and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-2. What is the HPY on your investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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