Suppose that an investor has 6 years investment horizon. The investor is considering a 13-year semi- annual coupon bond
Posted: Fri Mar 04, 2022 9:36 am
Suppose that an investor has 6 years investment horizon. The
investor is considering a 13-year semi- annual coupon bond selling
at par and having a coupon rate of 9%. Par value is $1000.
The investor expectations are as follows:
◼ The first 4 semi-annual coupon payments can be reinvested
from the time of receipt to the end of the investment horizon at an
annual interest rate of 7%,
◼ The next 8 semi-annual coupon payments can be reinvested
from the time of receipt to the end of the investment horizon at an
8% annual interest rate, and
◼ The required market interest rate on 7-year bonds at the
end of the investment horizon is 10%.
❑ What is the total return (horizon yield) for this
investor?
SHOW HANDWRITTEN WORK AND NOT EXCEL
investor is considering a 13-year semi- annual coupon bond selling
at par and having a coupon rate of 9%. Par value is $1000.
The investor expectations are as follows:
◼ The first 4 semi-annual coupon payments can be reinvested
from the time of receipt to the end of the investment horizon at an
annual interest rate of 7%,
◼ The next 8 semi-annual coupon payments can be reinvested
from the time of receipt to the end of the investment horizon at an
8% annual interest rate, and
◼ The required market interest rate on 7-year bonds at the
end of the investment horizon is 10%.
❑ What is the total return (horizon yield) for this
investor?
SHOW HANDWRITTEN WORK AND NOT EXCEL