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A 20 year maturity corporate bond has a 6.5% coupon rate (the coupons are paid annually). The bond currently sells for $925.50. A bond market analyst forecasts that in five years yield rates on these bonds will be at 7.0%. You believe that you will be able to reinvest the coupons earned over the next five years at a 6% rate of return. What is your expected annual compound rate of return if you plan on selling the bond in five years?

7.37%

7.56%

8.12%

8.54%

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M974453

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