Question

2. Calculate the Total bond return for a bond with 6.5% coupon and 15 years to maturity. The current YTM is 7.5%. The investment horizon is 7 years. The YTM at the end of the horizon period (8 year forward rate 7 years from now) would be 6.25%. The first 5 coupon payments can be reinvested at 4.25% and remaining coupon payments can be reinvested at 3.25%. 

          2. Calculate the Total bond return for a bond with 6.5% coupon and 15 years
to maturity. The current YTM is 7.5%. The investment horizon is 7 years. The
YTM at the end of the horizon period (8 year forward rate 7 years from now)
would be 6.25%. The first 5 coupon payments can be reinvested at 4.25%
and remaining coupon payments can be reinvested at 3.25%.
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2. Calculate the Total bond return for a bond with 6.5% coupon and 15 years to maturity. The current YTM is 7.5%. The investment horizon is 7 years. The YTM at the end of the horizon period (8 year forward rate 7 years from now) would be 6.25%. The first 5 coupon payments can be reinvested at 4.25% and remaining coupon payments can be reinvested at 3.25%.

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Horngren’s Cost Accounting
Horngren’s Cost Accounting
Srikant M. Datar, Madhav V. Rajan 16th Edition
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2. Calculate the Total bond return for a bond with 6.5% coupon and 15 years to maturity. The current YTM is 7.5%. The investment horizon is 7 years. The YTM at the end of the horizon period (8 year forward rate 7 years from now) would be 6.25%. The first 5 coupon payments can be reinvested at 4.25% and remaining coupon payments can be reinvested at 3.25%
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Transcript

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0:00 Hello.
00:01 So we're going to assume that the face value is going to be equal to $1 ,000.
00:10 Okay.
00:10 So for bond one, we are given the coupon rate is 6%.
00:20 The yield to maturity is 7%.
00:22 Here we have the end is equal to 12.
00:26 So the price of the bond then is going to be 60 times 7 .947 plus 1 ,000 times 0 .4440.
00:34 So the price of the bond, 92057, and then we get that the price of when we have, when the yield of maturity is next year when energy equals 11, we get the price of the bond is 925 .01...
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