Computing the holding period yield

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Reference no: EM132710112

The yield-to-maturity on a bond is the interest rate you earn on your investment if interest rates do not change. If you actually sell the bond before it matures, your realized return is known as the holding period yield. Suppose that today, you buy a 12 percent annual coupon bond for $1,000. The bond has 13 years to maturity. Two years from now, the yield-to-maturity has declined to 9 percent and you decide to sell. What is your holding period yield? (Hint: when you sell the bond at year 2, you will receive the prevailing price of the bond at year 2, so you need to find it first)

Reference no: EM132710112

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