You have purchased a 20-year bond with a yield-to-maturity of 10% and a duration of 12
years. Immediately after your purchase, there is a shock to interest rates which shifts the yieldto-
maturity of the bond to 12% and the duration of the bond to 11 years.
Assuming that the new interest rates persist indefinitely, determine the minimum holding period
from the purchase date to earn at least 10%.
(A) 0 years
(B) 11 years
(C) 12 years
(D) 20 years
(E) No holding period will earn 10%