Re-invest the coupons at an annual rate

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Reference no: EM13723713

let's say you buy a 12% coupon (paid semi-annually), AA-rated, $1000 par value coupon bond for $1100 when it has 16 years left until it's maturity. You re-invest the coupons at an annual rate of 6% and sell the bond off after 6 years, when its yield to maturity is 13%.

What yield were you hoping to earn when you purchased the bond?

What was your realized yield at the end of your 6-year holding period? Explain the difference, if any.

Reference no: EM13723713

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Re-invest the coupons at an annual rate : let's say you buy a 12% coupon (paid semi-annually), AA-rated, $1000 par value coupon bond for $1100 when it has 16 years left until it's maturity. You re-invest the coupons at an annual rate of 6% and sell the bond off after 6 years, when its yield ..

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