Per CFAI book pg 22
For the sake of simplicity, assume a flat yield curve of 8% and that a trader holds a three-year bond paying annual coupons based on a 8% coupon rate. Assuming a par value of 100, the current market price is also 100. If today’s forward curve turns out to be the spot curve one year from today, the trader will earn an 8% return.
If the trader projects that the spot curve one year from today is above today’s forward curve—for example, a flat yield curve of 9%—the trader’s expected rate of return is 6.24%, which is less than 8%:
why have they not discounted the first coupon payment… 8/(1+.09) ….?