The Treasury Department issues a 10-year coupon bond on January 1st, 2022. The first coupon is due on January 1st, 2023 and the last one on January 1st, 2032. The annual coupon payments are $100 each. There is also a final payment of $1,000 on January 1st, 2032. The market price of this bond on January 1st, 2022 was $1,000. If you bought this bond on January 1st, 2022 and held it to maturity, your yield to maturity (YTM) would be 10 percent. But you don't buy this bond on January 1st, 2022. You buy it on January 1st, 2030 when the interes rate is 10 percent and sell it on January 1st, 2031 when the interest rate is 11 percent. So your one year holding-period return equals percent.

The Treasury Department issues a 10-year coupon bond on January 1st, 2022. The first coupon is due on January 1st, 2023 and the last one on January 1st, 2032. The annual coupon payments are $100 each. There is also a final payment of $1,000 on January 1st, 2032. The market price of this bond on January 1st, 2022 was $1,000. If you bought this bond on January 1st, 2022 and held it to maturity, your yield to maturity (YTM) would be 10 percent. But you don't buy this bond on January 1st, 2022. You buy it on January 1st, 2030 when the interes rate is 10 percent and sell it on January 1st, 2031 when the interest rate is 11 percent. So your one year holding-period return equals percent.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 5P

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