Suppose that you just bought a four-year $1,000 coupon bond with a coupon rate of 6% when
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Suppose that you just bought a four-year $1,000 coupon bond with a coupon rate of 6% when the market interest rate is 6%. One year later, the market interest rate falls to 4%. What rate of return did you earn on the bond during the year?
CouponA coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...
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Money, Banking, and the Financial System
ISBN: 978-0134524061
3rd edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien
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