Question

Qn 2 S Johnson Investors has decided to purchase bonds issued by KG Corp The plan is to sell the bonds after 15 years. KG Corp bond particulars are: 7% coupon, AA rating, 23 year maturity, Price 975, FV $1,000 Based on her forecasts, S Johnson's analyst believes that the reinvestment rate for the next 15 years will be 5.5%. The analyst also predicts that the market interest rate at the end of 15 years will be 6.35%. Conduct a horizon analysis and determine the annual compound yield over the holding period