Question

What is the holding period yield on a 30 year 7% bond that we buy for $1020. We sell the bond in 4 years for $1040.

(Please show work)

Answer 1

Purchase price of Bond = $1020

Face Value of Bond = $1000

Annual Coupon payment = $1000*7% = $70

You holded the bond for 4 years and then sold at Price of $1040

Coupon Income in 4 years = $70*4 = $280

- Holding Period Yield = [(Selling Price - Purchase Price)+ Coupon Income]/Purchase Price

Holding Period Yield = [($1040 - $1020) + $280]/$1020

Holding Period Yield = 29.41%

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