Given a 4-year investment horizon, calculate the Total Return (annualized) for $1,000 face value of the bond
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Question:
- Given a 4-year investment horizon, calculate the Total Return (annualized) for $1,000 face value of the bond in the following scenario:
Coupon: 6% paid annually,
Initial YTM: 7%,
Maturity: 8 years,
Initial Price = 94.0287 (which is 94.0287 percent of par value).
Coupons are projected to be reinvested at a rate of 4%, and at the end of the 4-year horizon the bond will sell at a YTM of 6%.
What is the annualized Total Return (often referred to as a holding period return) for this scenario over the investment horizon?
Related Book For
Personal Financial Planning
ISBN: 9780357438480
15th Edition
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk
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