Question

You have purchased a bond with 6 year maturity, 6% coupon rate, $1000 face value, and...

You have purchased a bond with 6 year maturity, 6% coupon rate, $1000 face value, and semi-annual payments for $975.48.

Two years later, when the YTM=7.2%, you sell the bond.

What was your average annual realized yield on the bond, if you were able to reinvest coupons at 6.5%? [Provide your answer in percent rounded to two decimals, omitting the % sign.]

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Answer #1

=((6%*1000/6.5%*(1.0325^4-1)+6%*1000/7.2%*(1-1/1.036^8)+1000/1.036^8)/(975.48))^(1/2)-1

=5.4598%

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