Consider a 30-year bond paying an annual coupon of $70 and selling at par value of $1,000.
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Consider a 30-year bond paying an annual coupon of $70 and selling at par value of $1,000. The bond’s initial yield to maturity is 8%. Show that if yield to maturity increases, then holding-period return is less than initial yield. For example, suppose that by the end of the first year, the bond’s yield to maturity is 8.5%. Find the 1-year holding- period return and compare it to the bond’s initial 8% yield to maturity.
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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