Assuming that all coupons are reinvested over the holding period, the investors five-year horizon yield is closest

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Assuming that all coupons are reinvested over the holding period, the investor’s five-year horizon yield is closest to:

A. 5.66%.

B. 6.62%.

C. 7.12%.


An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. After the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period.

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Fixed Income Analysis

ISBN: 9781119627289

4th Edition

Authors: Barbara S. Petitt

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