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What is Tom three-year holding period return of this bond

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Reference no: EM132945199

Question - Tom purchased a bond today, the bond was issued a year ago with a 25-year maturity and has a yield to maturity (YTM) today of 8%. The coupon rate is 10% and coupons are paid annually. The par value is $1,000. Tom is going to hold this bond for 3 years and sell the bond at the end of year 3. The bond's yield to maturity will change to 9% at the time when Tom sells the bond. Assume coupons can be reinvested in short term securities over the next three years at an annual rate of 11%. What is Tom's three-year holding period return of this bond investment?

A. 15.856%

B. 16.789%

C. 17.211%

D. 17.889%

E. None of the above

Reference no: EM132945199

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