Dylan purchased 20 GIA Inc. bonds in 2008 when the yield to maturity was 12.5%. Because of falling interest rates she had to reinvest the coupon payments at 8%, 6%, 4% and finally, 3%
The internal rate of return on her investment will be
A) greater than the coupon rate but less than the original yield to maturity.
B) less than the original yield to maturity.
C) greater than the original yield to maturity.
D) the reinvestment rate has no effect on the internal rate of return.
Answers: 1
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Dylan purchased 20 GIA Inc. bonds in 2008 when the yield to maturity was 12.5%. Because of falling i...
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