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    Example: Realized Compound Yield

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    kanye
    This document discusses calculating realized compound yield on a bond. A 2-year bond with a $100 face value and $10 annual coupon is priced at $96.62, yielding 12%. If the $10 annual coupon is reinvested at 10%, the cash flow after 2 years would be $121. The realized compound yield, taking into account the reinvested coupon, would be approximately 11.9%. The next lecture will discuss reinvesting coupons in more detail.

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    Example: Realized Compound Yield

    Uploaded by

    kanye
    6 views1 page
    This document discusses calculating realized compound yield on a bond. A 2-year bond with a $100 face value and $10 annual coupon is priced at $96.62, yielding 12%. If the $10 annual coupon is reinvested at 10%, the cash flow after 2 years would be $121. The realized compound yield, taking into account the reinvested coupon, would be approximately 11.9%. The next lecture will discuss reinvesting coupons in more detail.

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    Lecture 1(1).40

    Original Title

    Lecture 1(1).40

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    This document discusses calculating realized compound yield on a bond. A 2-year bond with a $100 face value and $10 annual coupon is priced at $96.62, yielding 12%. If the $10 annual coupon is reinvested at 10%, the cash flow after 2 years would be $121. The realized compound yield, taking into account the reinvested coupon, would be approximately 11.9%. The next lecture will discuss reinvesting coupons in more detail.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    6 views1 page

    Example: Realized Compound Yield

    Uploaded by

    kanye
    This document discusses calculating realized compound yield on a bond. A 2-year bond with a $100 face value and $10 annual coupon is priced at $96.62, yielding 12%. If the $10 annual coupon is reinvested at 10%, the cash flow after 2 years would be $121. The realized compound yield, taking into account the reinvested coupon, would be approximately 11.9%. The next lecture will discuss reinvesting coupons in more detail.

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    © All Rights Reserved
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    of 1

    Example: Realized compound yield

    A bond maturing in 2 years has a face value of $100


    and pays an annual coupon of $10
    The price is $96.62, so the yield to maturity is 12%
    Suppose we can reinvest the coupon at 10%
    The resulting cash flow at time 2 would be CF2=100 +
    10 + 10(1+0.1) = 121
    The realized compound yield would be
    y

    121
    1 11.9%
    96.62

    We will be very interested in such reinvestments in the


    next lecture

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