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You buy a $10,000 bond at par with a 6.1% coupon that pays semi-annually. A) Calculate your total return if you hold the bond to
You buy a $10,000 bond at par with a 6.1% coupon that pays semi-annually.
A) Calculate your total return if you hold the bond to maturity and reinvest your coupon income at 5%.
B) Calculate your total return if you sell bond after 2 years, at which point such bonds are yielding 5.2% in the market. Why do the two scenarios produce different rates of return?
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