You hold a bond with nine years until maturity, a YTM of 4 percent, and a duration
Question:
a. In the next few minutes, you expect the market yield to go up by 5 basis points. What is the bond's expected percentage price change, and your expected return, over the next few minutes?
b. Over the next year, you expect the market yield to go clown by 30 basis points. For this period, estimate the following:
i. The bond's expected price change
ii. Your expected return
iii. The bond's risk premium
Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...
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