You buy an 8-year $1,000 par value bond today that has a 6% yield and a 6% annual payment coupon. In 1 year promised yields have risen to 7%. Your 1-year holding-period return was ________.

Question

Quizplus · Accepted Answer

This year's price is 1,000. since the YTM equals the coupon rate.
Calculator entries for next year's price are N = 7, I/Y = 7, PMT = 60, FV = 1,000, CPT PV → −946.11
At the end of 1 year you'll have 946.11 + 60 = 1,006.11
HPR = 1,006.11/1,000 − 1 = .6107%

You Buy an 8-Year $1,000 Par Value Bond Today That