Devin, a private investor, purchases $1,000 par value bonds with a 12 percent coupon rate and a 9 percent yield to maturity. Devin will hold the bonds until maturity. Thus, he will earn a returnof ____ percent.

Question

Quizplus · Accepted Answer

The yield to maturity of 9% tells us the expected rate of return if held until maturity. Since Devin plans to hold the bonds until maturity, he will earn a return of 9%. The coupon rate of 12% is irrelevant to the calculation of the return.

Devin, a Private Investor, Purchases $1,000 Par Value Bonds with a 12