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A bond has a YTM of 5% over a 6 year period. The purchase price was...

A bond has a YTM of 5% over a 6 year period. The purchase price was 94.87. The coupon is 4%. What is the sum of the reinvested coupons?

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Answer #1

The sum of the reinvested coupon is $27.90127415

Please see the screenshot for calculations

Each year we would receive $4 in the coupon. Each coupon payment is reinvested for the remaining life of the bond.

The first-year coupon is reinvested for 5 years

The second-year coupon is reinvested for 4 years and so on

We add all the reinvested coupon to arrive at $27.90127415 as the sum of the reinvested coupon.

Screenshot with formulas

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