What formula measure would an investor use to calculate the yield on a 20-year bond with 10 years to maturity, if he or she only intends to hold the bond for 5 years?

Question

Quizplus · Accepted Answer

The investor would use the anticipated realized yield formula, which takes into account the yield to maturity, the coupon rate, the time to maturity, and the price paid for the bond. However, since the investor only intends to hold the bond for 5 years, he or she would also need to estimate the future value of the bond at that time and factor it into the calculation. This formula gives the investor an estimate of the actual return he or she can expect to realize over the 5-year holding period.

What Formula Measure Would an Investor Use to Calculate the Yield