Realized Compound Yield
§
The Yield-to-Maturity measure implicitly assumes that all
coupons can be invested at the internal rate of return.
§
An alternative ex-post yield measure can be computed that
takes the actual reinvestment rates.
100
1100
Time
0
1
2
1100
Reinvested at 8%
108
1208
Realized compound yield = (1208/1000)
0.5
- 1 = 9.91%
-1000
Yield to maturity = 10%