Assume That You Purchase a 10-Year, $1,000 Par Value Bond

question 99

Multiple Choice

Assume that you purchase a 10-year, $1,000 par value bond, with a 12 percent coupon and a yield of 9 percent. Immediately after you purchase the bond, yields fall to 8 percent and remain at that level to maturity. Calculate the realized horizon yield, if you hold the bond for five years and then sell. Interest is paid annually.

• A) 16.25 percent
• B) 12.15 percent
• C) 7.75 percent
• D) 10.05 percent
• E) 9.34 percent

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