Question: You purchase a $100 face value U.S. 10%, 30 year bond for 110. Its duration is 11 years 1. What is the ytm of the

You purchase a $100 face value U.S. 10%, 30 year bond for 110. Its duration is 11 years

1. What is the ytm of the bond?

2. What is the current yield of the bond? Is it higher or lower than the bonds ytm?

3. If you sold the bond at the end of 1 year what return would you have earned it if its yield to maturity rose by 50 basis points?

4. What is your cash flow yield if you sold the bond at the end of 5 years at a ytm of 12%?5. If you held the bond for 10 years what return would you have earned (i.e. RCY) if the reinvestment rate (R) was 10 percent?

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