Question: A bond is selling for $ 1 0 2 9 . The coupon rate is 7 . 8 % . It has 1 8 -

A bond is selling for $

1029 .

The coupon rate is

7.8 % .

It has

18 -

years till maturity, with semi

-

annual compounding. What is the yield

-

-

maturity

(

YTM

) ?

calculate the realized compound yield

(

RCY

)

with a re

-

investment rate of

9 % .

What problem does the RCY correct and why is this important? If the investor believes interest rates are going to increase, is this a good bond choice? Think Price

/

Yield curve. please show work and steps.

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