Concept checker: bonds

Say you buy a 10% bond at par and hold it to maturity. If interest rates rise, would your return be lower, higher, or same as the initial YTM? Basically asking the impact of interest rate on your return.

same, right?

Your return would be the same if held to maturity. It only matters if you plan to sell prior and interest rates change.


why? I guess there is a dif if you are reinvesting those cash flows into a higher interest rate environment and you consider that part of your return, but I dont see how buying and holding is affected by changes in rates.

Reinvestment of coupons. Don’t forget that yield to maturity is IRR and that you assume reinvestment at IRR.

I would say higher due to higher reinvestment rate of coupon payments.