Why is it said that zero-coupon bonds lock in the reinvestment rate?
Answer to relevant QuestionsIs the locked-in reinvestment assumption valid for zero-coupon bonds if they are sold before maturity? Explain. You buy a zero-coupon bond for $200 and 15 years later sell it for $728.40. What rate of return did you earn? a. Compute the duration for the following data. Use a discount rate of 13 percent. b. Explain why the answer to part a is higher than the answer to problem 2. c. If in part a the discount rate were 10 percent instead of 13 ...Why might mutual funds be particularly beneficial in the international area? Assume you invest in the German equity market and have a 20 percent return (quoted in euros). a. If during this period the euro appreciated by 10 percent against the dollar, what would be your actual return translated into ...
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