Using the bond below, calculate your annual holding period yield (on a bond equivalent basis). Holding...

Using the bond below, calculate your annual holding period yield (on a bond equivalent basis).

Holding period yield (HPY)
Last coupon date pre-purchase	7/15/2016
First coupon date post-purchase	1/15/2017
Purchase price (clean)	90.000
Purchase (settlement) date	10/1/2016
Sale price (clean)	92.000
Sale date	2/10/2022
Coupon rate	5.00%
Coupon	Semi-annual
Convention	30/360

3.096%
5.888%
6.192%
6.246%
6.288%

Solutions

Expert Solution

Oct 1.2016	Purchase
15-Jan-17	1st coupon	31+30+31+15=	107
Jul-17	1	5 yrs.
Jan-18	2
Jul-18	3
Jan-19	4
Jul-19	5
Jan-20	6
Jul-20	7
Jan-21	8
Jul-21	9
Jan-22	10
Feb 10,2022		16+10=	26
			133

Assuming a $ 100 Face value bond,
1.Purchase price (without accrued interest)			-90
Coupon Interest receipts for
Oct.1 2016 to Jan 15,2017(105 days)	1005%107/360	1.46
Jan 15, 2017--Jan 22 2022(10 semiannual coupon periods)	1005%/210=	25.00
Jan 16,2022--Feb 10, 2022(26 days)	1005%26/360	0.36
2.Total interest reciepts			26.82
3.Sale price (without accrued interest)			92
4.Net holding period gain(1+2+3)			28.82
Gain % (28.82/90)------------ (4/1)			32.02%
for a total of 5 yrs. & (133/360) days (ie. 5.36944 yrs.)
Holding period Yield/ Year			5.96%
Nearest Option ANSWER: 5.89%

jeff jeffy answered 2 days ago

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