I don't understand how to calculate realized compound yield. Is it the same as yield to maturity? Please see problem below.
Bonds of XYZ Corp. with a par value of $1,000 sell for $950, mature in 8 years, and have a 9% annual coupon rate paid semiannually.
Calculate the realized compound yield for an investor with a 2-year holding period and a reinvestment rate of 7% over the period. At the end of two years the 9% coupon bonds with 6 years remaining will sell to yield 9%.
Current yield = 9.47
Yield to maturity = 9.92 or 10%
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Below are my answers.
This solution calculates realized compound yield.