Home / Questions / It is now the beginning of a year. Jared is considering the purchase of a 7.5 percent (cou
It is now the beginning of a year. Jared is considering the purchase of a 7.5 percent (coupon rate), 15-year bond that is presently priced to yield 11 percent (i.e. market interest rate is 11 percent). Based on extensive analysis of market interest rates, he thinks rates will fall so that at the end of this year the market yield of this issue will drop to 9 percent. If his expectations are correct, what kind of realized return will Jared earn by purchasing the bond today and selling the bond at the end of the year? (Assuming annual interest payments)
28.05%
18.03%
23.95%
26.74%
25.07%
Dec 04 2019 View more View Less
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