1.69% is Return on holding period for a ten-year maturity bond that has a 7.75% current yield and a 7.75% coupon and promised yields to maturity have risen to 8.75%.
Assume the bond has a face value of $1,000 and you purchased it at that price.
a year later, the market value:
Face value PV = $1,000 / (1 + 8.75%)⁹ = $470.04
PV of coupon payments = $469.39 x 6.05666 (PV annuity factor, 8.75%, 9 periods)
$939.43 is the market value.
Return on holding period = [income generated + (ending value - initial value)] / starting point
Return on holding period = [$77.50 + ($939.43 - $1,000)] / $1,000 = 0.01693 = 1.69%
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