What is the rate of return for an investor

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Q1) If a bond with a 2% coupon, face of $100 and a 5-year maturity sells for $99, what is the rate of return for an investor that buys the bond and holds it to maturity? What is the rate of return if the investor instead holds the bond for only a year and sells it for $100?

Q2) Which bonds are more sensitive to changes in the yield (in terms of the impact on the bond price) - long or short maturities?

Q3) Which bond would you expect to have a higher yield - investment grade (AAA) or junk (BB)?

Reference no: EM132884862

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