One question:
a bond at par $100, 10% semi-annual coupon. the bond is priced to yield 9% ($105.11), assume the coupon can be reinvested at 7%, pls calculate BEY and EAR in 1 year horizon
Obviously, the bond has 7 years left until maturity.
We cannot calculate the total return for one year without knowing its value in one year.
I understand that the bond has 7 years to maturity, the question is to calculate the return of holding the bond until one year later.
I am confused about the ending price of the bond, should the market yield still be 9%?
In the real world there’s no reason to suppose that it would be. The question needs to be explicit on either the ending price or the ending YTM. Without one or the other, the question is unanswerable.