horizon yield和YTM

问题如下：

Assuming no capital gain or loss when the bond is sold, an investor’s horizon yield is equal to a bond’s yield-to-maturity at the time of investment if coupons are reinvested at a rate:

选项：

A.

lower than the bond’s yield-to-maturity at investment.

B.

equal to the bond’s yield-to-maturity at investment.

C.

higher than the bond’s yield-to-maturity at investment.

解释：

B is correct. For the horizon yield to match the original yield-to-maturity of the bond, two conditions must be met:

(1) The coupon payments are reinvested at the original yield-to-maturity.

(2) The bond is sold at the constant-yield price trajectory, implying no capital gain or loss when the bond is sold.

Since there is no gain or loss when the bond is sold, the horizon yield will be equal to the yield-to-maturity if the first condition is met (i.e., the coupons are reinvested at the original yield-to-maturity).

A is incorrect because the horizon yield will be lower than the yield-to-maturity if the coupons are reinvested at a lower rate than the original yield-to-maturity, assuming no capital gain or loss on sale of the bond.

C is incorrect because the horizon yield will be higher than the yield-to-maturity if the coupons are reinvested at a higher rate than the original yield-to-maturity, assuming no capital gain or loss on sale of the bond.