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Suppose you have a 1-year horizon and purchase a 5-year (annual) coupon bond. If the price of the bond on the horizon date is the same as the price you paid, your ROR will equal:

User Margaretha
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Answer:

the bond's current yield.

Step-by-step explanation:

When the price of the bond is equal to the initial price paid for the bond, the current yield rate of the bond is equal to the ROR of the bond. If there is the market price of the bond is the same as the initial issuance value of the bond the investors of the bond do not gain or lose anything from this bond from the change in price in the time period between the issuance of the bond and Purchasing date of the bond.

Current Yield = Annual Coupon payment / Market price of the bond

The bond yield will remain the same when the selling price of the bond and the issuance price of the bond remain the same. As the coupon payment is fixed every time.

User Christopher Bales
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