Which of the following conditions is not required for the realized horizon yield to equal the original yield to maturity on an option-free, fixed-coupon bond?
- The coupon payments are reinvested at the same interest rate as the original yield to maturity.
- The bond is sold at a price on the constant-yield price trajectory.
- The bond is held to maturity.
Please Explain the question
Realised yield is basically the yield that we actually get after selling the security or holding till maturity as the case may be.
Original yield to maturity is the yield that is being promised to you when you buy the bond.
So realised yield (jo actually hume mila) will be equal to original YTM when certain conditions are met.
The question is asking what is NOT such a condition.
Answer is B in the above ques since bond is held till maturity and not sold in between.
Hope this helps!