Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 9% coupon bond

Question:

Suppose that an investor with a five-year investment horizon is considering purchasing a seven-year 9% bond selling at par. The investor expects that he can reinvest the payments at an annual interest rate of 9.4% and that at the end of the investment horizon two-year bonds will be selling to offer a yield to of 11.2%. What is the total return for this bond? Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...