A year ago, you bought a bond with a coupon rate of 5.4%, just after it paid its semiannual coupon. The bond had 23 years to maturity, a face value of $1,000 and a yield to maturity of 3.4%. Shortly after buying the bond, yields changed to 4.5%. You reinvested the first coupon at the new market interest rate. What is your realized yield if you sell the bond now, one year after buying it?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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A year ago, you bought a bond with a coupon rate of 5.4%, just after it paid its semiannual coupon. The bond had 23 years to maturity, a face value of $1,000 and a yield to maturity of 3.4%.

Shortly after buying the bond, yields changed to 4.5%. You reinvested the first coupon at the new market interest rate. What is your realized yield if you sell the bond now, one year after buying it?

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