Question

Bond computing.

The YTM of a 15 year 9% bond that is currently selling for $1,134,hold it for four years, and then sell it for $1080. What is your total return (or “realized compound yield”) if you reinvested your coupon payments at 4%?

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Total return = Capital appreciation + Interest + Interest earned on interest
= -$54 + $385.97 = $331.97

Total return = $331.97/$1134 = 29% over the...

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