Consider a bond that has a current value of 107.62, a coupon of 8% (paid semi-annually), and 2 years to maturity. If the...

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Consider a bond that has a current value of 107.62, a coupon of 8% (paid semi-annually), and 2 years to maturity. If the...

Consider a bond that has a current value of 107.62, a coupon of 8% (paid semi-annually), and 2 years to maturity. If the investor can reinvest the coupons at 8.5%, the horizon yield is _____________.

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Answer 1

Answer #1

If the investor can reinvest the coupons at 8.5%, the horizon yield is
=((8%*100/8.5%*(1.0425^4-1)+100)/(107.62))^(1/2)-1
=4.29%

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Answer 2

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