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  3. suppose a 5 year bond paying 5% coupon is priced a

Suppose a 5 year bond paying 5% coupon is priced at par today and yield...

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Accounting

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Suppose a 5 year bond paying 5% coupon is priced at par today and yield remains stable for the next 4 years at 6%. Compare the two strategies: (1) Buy the 5 year bond initially and reinvest the coupon to maturity. Whats the total return after bond matures in 5 years? (2) Buy the 5 year bond with 5% coupon and sell it at 1 year. Then buy a four year bond paying 6% coupon. Whats the total return after the 4 year bond matures?

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4 Suppose a 5 year bond paying 5% coupon is priced at par today and yield remains stable for the next 4 years at 6%. Compare the two strategies: (1) Buy the 5 year bond initially and reinvest the coupon to maturity. What's the total return after bond matures in 5 years? (2) Buy the 5 year bond with 5% coupon and sell it at 1 year. Then buy a four year bond paying 6% coupon. What's the total return after the 4 year bond matures

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