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What is the total return for investor

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Reference no: EM133119741

Suppose that an investor has 6 years investment horizon. The investor is considering a 13-year semi- annual coupon bond selling at par and having a coupon rate of 9%. Par value is $1000.

The investor expectations are as follows:

  • The first 4 semi-annual coupon payments can be reinvested from the time of receipt to the end of the investment horizon at an annual interest rate of 7%,
  • The next 8 semi-annual coupon payments can be reinvested from the time of receipt to the end of the investment horizon at an 8% annual interest rate, and
  • The required market interest rate on 7-year bonds at the end of the investment horizon is 10%.
  • What is the total return (horizon yield) for this investor?

Reference no: EM133119741

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