Question
You buy a bond with a $1,000 par today for a price of $975. The bond has 3 years to maturity and makes annual coupon
You buy a bond with a $1,000 par today for a price of $975. The bond has 3 years to maturity and makes annual coupon payments of $75 per year. The yield to maturity is 8.478%.
A. Suppose that you hold the bond to maturity and receive all of the coupon payments, but you do not reinvest any of your coupons. What is your realized compound yield?
B. Now assume that you reinvest your coupons. You earn 9% over the first year and 8.7% over the second year. What is your realized compound yield now?
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
