Suppose the term structure rates are given in the table below.
1. What is the yield to maturity of a 6% annual coupon bond maturing in 4 years? (you have to compute the price first)
2. The reinvestment rates are also given that apply for the specified date until the maturity. What is the Total Holding Period Return on the bond if it is purchased today and held to maturity? (you have to use the price you computed in a.)
can i have more calculation details or reasons for that? Thanks!
|
Date
|
Term Structure
|
Reinvestment Rate until maturity (annualized)
|
|
1 yr
|
5%
|
11.72%
|
|
2 yr
|
8%
|
12.04
|
|
3 yr
|
10%
|
10.00
|
|
4 yr
|
10%
|
|