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sir i also had another doubt related to YTM of redeemable bonds or debt. Now, YTM as per my understanding is the rate of return investors can expect to receive if they reinvest all their coupon payments at YTM rate until the maturity bonds.
But then isnt this too far-fetched an assumption? As in the market price when i reinvest my coupons receipts(semi-annually or annually) would be different each time, so won’t that affect my overall YTM?
Or is it that I will achieve the YTM calculated if i just stuck with the rule of reinvesting at YTM rate, regardless of the market price of the bond at the time of reinvestment?
The yield to maturity is the overall rate of return that investors are receiving – the interest together with any premium on redemption.
It doesn’t assume anything about reinvestment and is the IRR of the receipts to the investor.
Have you watched my free lectures on this?