What did the reinvestment rate

Reference no: EM132199774

Question - An investor has a 2-year horizon and purchases the bond in 1. She reinvests the first coupon at a 7.5% rate and then sells the bond on her horizon at a 7% yield. What is her Rate-of-Return (ROR)?

Redo the previous question but assume a reinvestment rate of 6.5% and she sells the bond on her horizon at a 6.5% yield.

Now you can explain why the ROR in the previous question differs from this one:

What did the reinvestment rate of 7.5% instead of 6.5% do to ROR (increase or decrease)?

What did selling the bond at a yield of 7% instead of 6.5% do to ROR (increase or decrease)?

Reference no: EM132199774

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