A horizon yield is the internal rate of return between the total return (i.e.
the sum of reinvested coupon payments and sale price) and the purchase
price of the bond.
Fixed Income MCQ - Fixed Income Section 2
A bond selling at a discount has a lower coupon rate. All else being equal,
bonds with lower coupon rates have lower reinvestment risk. The reason is
that the lower the coupon rate, the less dependent the bond's total dollar
return will be on the reinvestment of the coupon payments in order to
produce the yield to maturity at the time of purchase.
If the investment horizon is short, market price risk will dominate the
reinvestment risk.
