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You bought a corporate bond four years ago which at the time of purchase had a 16 year maturity, a 12% annual coupon and a
You bought a corporate bond four years ago which at the time of purchase had a 16 year maturity, a 12% annual coupon and a 12% promised yield to maturity. Immediately after purchase, all interest rates fell to 10% and stayed there. You held the bond for 4 years and then sold it for $1136.27. What was the actual compound annual rate of return on the bond (to the nearest basis point)? To keep it simple assume a flat yield curve and ignore any liquidity premiums, use annual compounding).
Answer is 14.07%
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