Consider a bond with a $1,000 face value, 10 years to maturity, and $80 annual coupon interest

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Consider a bond with a $1,000 face value, 10 years to maturity, and $80 annual coupon interest payments. The bond sells at a price that produces a 10% yield-to-maturity. That yield is expected to decline to 9% at the end of 4 years. Interest income is assumed to be invested at 9.5%. Calculate the bond's 4-year holding period return and the four components of that return.
Coupon
A 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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Fundamentals of Investments

ISBN: 978-0132926171

3rd edition

Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey

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