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15. The YTM on a bond is the interest rate you earn on your investment if...

15. The YTM on a bond is the interest rate you earn on your investment if interest rates donâ t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). Suppose that two years ago, you bought a bond with an annual coupon rate of 7 percent, priced at $1,020 with 16 years to maturity, and $1,000 par value. Since then the YTM of the bond has declined by 1 percent, and you decide to sell. What price will your bond sell for today? What is the HPY on this investment?

$1,232.66; 10.22%

$1,113.82; 11.22%

$1,125.67; 10.87%

$1,035.66; 11.84%

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