Homework Answers
8. Since bond is bought at par value YTM is same as coupon
rate
YTM =10%
Coupon =10%*1000 =100
After 3 years the price of bond is 1000
Rate of Return over this period =(1000-1000+3*100)/1000 =30%(Option
d is correct option)
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> At the end of year 3: since you sell it, you get $1100 and you get $100 coupon payment for that period also.
So, P0 = 1000, P3 = 1100 + 200 (from t@1,t@2) + 100(from t@3) , total = 1400
Hence, Rate of Return over this period =(1400-1000)/1000 =40%
Priyanka Bapat Wed, Jan 12, 2022 9:41 PM