Bond is interest rate you earn on your investment

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The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY).

a. Support that today you buy a 8% coupon bond making annual payments for $641. The bond has 14 years to maturity. What rate of return do you expect to earn on your investment?

b. 5 years from now, the YTM on your bond has declined by 1.6 percent, and you decide to sell. What price will your bond sell for?

c. In part b, what is the holding period yield (HPY)on your investment?

Reference no: EM131499857

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