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Sir can you please explain in simple words what does this gross redemption yield mean. And how we will have clue that we should try 4%or 5% cant we try any random no like say 14,9 or anything.Or is it because we r taking the near coupon rate to the present one. Thanks
It is the overall return to the investor (a combination of the interest they are receiving and the gain or loss on repayment (as compared to the current market value)).
As a starting point best is to divide the coupon rate by the market value, and then make your two guesses and calculate the IRR. Any two sensible guesses will do.
Thank you sir its meaning us clear now. In this question part (a) could u please show me how to do.Why is the examiner taking 60 while trying from 5%n 4%, can u please show me this in way of IRR. Thanks
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