Question

Assume that an investor pays ​$880 for a​ long-term bond that carries a coupon of 11​%....

Assume that an investor pays ​$880 for a​ long-term bond that carries a coupon of 11​%. In 3​ years, he hopes to sell the issue for $1,055.

If his expectations come​ true, what yield will this investor​ realize? (Use annual​ compounding.) What would the holding period return be if he were able to sell the bond​ (at

​$1,055​) after only 9​ months?

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Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

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