A ten-year zero coupon bond pays $1,000 in ten years (with no other payments). If you...

 

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A ten-year zero coupon bond pays $1,000 in ten years (with no other payments). If you hold this bond for one year, it will not pay any coupons, but will become a nine-year bond that pays $1,000 in nine years. Assuming you use a constant discount rate of 10% per year, what is the holding period return from holding this bond for one year? A ten-year zero coupon bond pays $1,000 in ten years (with no other payments). If you hold this bond for one year, it will not pay any coupons, but will become a nine-year bond that pays $1,000 in nine years. Assuming you use a constant discount rate of 10% per year, what is the holding period return from holding this bond for one year?

Answer rating: 100% (QA)

To calculate the holding period return HPR from holding the bond for one year we need to determine t... View the full answer