posted by JUAN on .
Suppose a Midwest Telephone and Telegraph (MTT) Company bond,
maturing in 1 year, can be purchased today for $975. Assuming that the
bond is held until maturity, the investor will receive $1,000 (principal) plus
6 percent interest (that is, 0.06 3 $1,000 5 $60). Determine the percentage
holding period return on this investment.
What you want is called the Yield To Maturity (YTM). In one year, the net gain will be 25 + 60 = $85 on an investment of $975. that is 8.72% YTM annual interest