You purchase a 20-year bond that has a par value of $1,000 and pays an annual coupon of $100 ($50 every six months). The yield to maturity was 6.0 percent when you purchased this bond. Now, right after you purchased this bond, the yield (reinvestment rate) went up to 11.0 percent (5.5 percent every six months). Determine your realized compounded yield if you hold this bond for 10 years, then sell it, and reinvestment rates stay at 11.0 percent for the entire 10-year period. Enter your answer in decimal format, to four decimal places. For example, if your answer is 3.11%, enter "0.0311"

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter6: Fixed-income Securities: Characteristics And Valuation
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You purchase a 20-year bond that has a par value of $1,000 and pays an annual coupon of $100 ($50
every six months). The yield to maturity was 6.0 percent when you purchased this bond. Now, right
after you purchased this bond, the yield (reinvestment rate) went up to 11.0 percent (5.5 percent
every six months). Determine your realized compounded yield if you hold this bond for 10 years, then
sell it, and reinvestment rates stay at 11.0 percent for the entire 10-year period.
Enter your answer in decimal format, to four decimal places. For example, if your answer is 3.11%,
enter "0.0311".
Transcribed Image Text:You purchase a 20-year bond that has a par value of $1,000 and pays an annual coupon of $100 ($50 every six months). The yield to maturity was 6.0 percent when you purchased this bond. Now, right after you purchased this bond, the yield (reinvestment rate) went up to 11.0 percent (5.5 percent every six months). Determine your realized compounded yield if you hold this bond for 10 years, then sell it, and reinvestment rates stay at 11.0 percent for the entire 10-year period. Enter your answer in decimal format, to four decimal places. For example, if your answer is 3.11%, enter "0.0311".
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