For a long-term high-yield coupon bond, do you think that the total return from holding a bond to maturity will be closer to the yield to maturity or the reinvestment rate?
Answer to relevant QuestionsSuppose that an investor with a five-year investment horizon is considering purchasing a seven-year 9% coupon bond selling at par. The investor expects that he can reinvest the coupon payments at an annual interest rate of ...What is the yield to maturity calculated on a bond-equivalent basis? Consider the following two Treasury securities: Which bond will have the greater dollar price volatility for a 25-basis-point change in interest rates? “If two portfolios have the same duration, the change in their value when interest rates change will be the same.” Explain why you agree or disagree with this statement. State why you would agree or disagree with the following statement: When interest rates are low, there will be little difference between the Macaulay duration and modified duration measures.
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