1. An investor buys a 20-year semiannual bond with a coupon rate of 5% for $950. He plans to hold the bond for 8 years and then sell it. The investor expects to reinvest the first 6 coupon payments at 4.5% and the next 10 payments at 5.5%. He also expects the bond's YTM at the end of the holding period to be 6%. Find annualized total return.

 2. At which tax rate will investors prefer a corporate bond with a pre-tax yield-to-maturity of 12% and municipal security with a pre-tax yield-to-maturity of 9%?  Please answer the above questions with proper solutions and answers. 

Answer rating: 100% (QA)

1 To calculate the annualized total return we need to determine the future value of the bond at the end of the holding period and then calculate the c... View the full answer