Bond Interview Question?
Saw this question and I had no idea how to answer it.
A bond with 6% coupon and 30yr term is bought with 6% YTM. After a year, one coupon payment is collected and the bond is sold with 11% YTM. Without using a calculator, what is the one year IRR of this investment?
The answer is supposed to be -40%, but no idea have to get there. Thoughts?
Cash distribution gets you 6% yield. Capital depreciation nets you 6/11-1.
Add those 2 up to get -40%
can u just go into a little more detail please
Bond's at par (coupon = YTM) throughout Y1. At sale, it's at a discount (coupon
Eum aliquam voluptas quisquam ea officiis. Eos perferendis sed possimus dolorem. Voluptatem expedita eum quo quo nihil et. Aut tenetur quibusdam necessitatibus praesentium atque. Ab provident iure eum. Ducimus quo nesciunt alias repellat qui qui. Placeat sequi aut quaerat.
Nihil alias non sunt soluta. Nihil eum nihil quo. Omnis sit earum sit error. Qui inventore iste adipisci et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...