标题: bond's total return calculation [打印本页]

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作者: bchadwick    时间: 2011-7-13 13:53     标题: bond's total return calculation

Mock 2010 PM:

A beginning price of $103, a 5% semiannual coupon, an expected price at the end of one year of $102.5, and an annual reinvestment rate of 2 percent.

What is the one-year expected total return?

My answer is:

(102.5+2.5+2.5x1.01)/103 - 1 = 4.39%


The guideline answer is:
102.5+2.5+2.5x1.01 = 107.525
(107.525/103)^0.5 - 1 = 0.02173
2.17% x 2 = 4.35%

Do we have to use BEY for total return?

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