Realized Yield

[pvalka]

Please explain.

A 3 year, 6% coupon, semi-annual note has a YTM of 5.5%. If an investor holds this note to maturity and earns a 4.5% return on reinvested income, his realized yield on the note is cloest to:

A. 5.46%
B. 5.57%
C. 5.68%
D. 5.79%

 

[jo_l]

no calculation,
A

 

[dcbreber]

agree.. to realize the YTM of 5.5%, the reinvestment return rate has to be 5.5%

 

[daj224]

where is this, in FI or quant?

thanks ?

 

[pvalka]

Its in FI. "No calculation" - So how did you do that jo_l?

 

[pepp]

your YTM if you held woudl have been 5.5 but your reinvestment rate is not same as YTM. hence your YTM gotte be lower than your current YTM.