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Two years ago, you bought a 10-year, 6% annual coupon payment bond when its yield-to-maturity was 8%. Right after you purchased this bond, the yield-to-maturity
Two years ago, you bought a 10-year, 6% annual coupon payment bond when its yield-to-maturity was 8%. Right after you purchased this bond, the yield-to-maturity on this bond increased to 9% and stayed at the same level in the next two years. You reinvested the coupon payments at the market rate of 9%. You just sold the bond at 9% yield-to-maturity. What is your annualized holding period return? What is your capital gain/loss? Note: Remember that capital gains/losses are computed with respect to the price on the constant price-yield trajectory.
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