John buys a 10-year bond with annual coupons. The par value of this bond is 10000 as is the redemption value, and it has an annual coupon rate of 6%. The price John pays for the bond gives it an annual effective yield of 12%. John has set up her investments so that the coupons are immediately deposited in a savings account with an annual effective rate of 9%. What is the annual effective yield (IRR) of John's overall investment over the 10-year term?
John buys a 10-year bond with annual coupons. The par value of this bond is 10000 as is the redemption value, and it has an annual coupon rate of 6%. The price John pays for the bond gives it an annual effective yield of 12%. John has set up her investments so that the coupons are immediately deposited in a savings account with an annual effective rate of 9%. What is the annual effective yield (IRR) of John's overall investment over the 10-year term?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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