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Using the bond below, calculate your annual holding period yield (on a bond equivalent basis). Holding period...

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Finance

Using the bond below, calculate your annual holding period yield(on a bond equivalent basis).

Holding period yield (HPY)
Last coupon date pre-purchase7/15/2016
First coupon date post-purchase1/15/2017
Purchase price (clean)90.000
Purchase (settlement) date10/1/2016
Sale price (clean)92.000
Sale date2/10/2022
Coupon rate5.00%
CouponSemi-annual
Convention30/360
  • 3.096%
  • 5.888%
  • 6.192%
  • 6.246%
  • 6.288%

Answer & Explanation Solved by verified expert
3.9 Ratings (392 Votes)

Oct 1.2016 Purchase
15-Jan-17 1st coupon 31+30+31+15= 107
Jul-17 1 5 yrs.
Jan-18 2
Jul-18 3
Jan-19 4
Jul-19 5
Jan-20 6
Jul-20 7
Jan-21 8
Jul-21 9
Jan-22 10
Feb 10,2022 16+10= 26
133
Assuming a $ 100 Face value bond,
1.Purchase price (without accrued interest) -90
Coupon Interest receipts for
Oct.1 2016 to Jan 15,2017(105 days) 100*5%*107/360 1.46
Jan 15, 2017--Jan 22 2022(10 semiannual coupon periods) 100*5%/2*10= 25.00
Jan 16,2022--Feb 10, 2022(26 days) 100*5%*26/360 0.36
2.Total interest reciepts 26.82
3.Sale price (without accrued interest) 92
4.Net holding period gain(1+2+3) 28.82
Gain % (28.82/90)------------ (4/1) 32.02%
for a total of 5 yrs. & (133/360) days (ie. 5.36944 yrs.)
Holding period Yield/ Year 5.96%
Nearest Option ANSWER: 5.89%
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