A bond has a $1,000 par value, 10 years to maturity, and pays a coupon of 7.0% per year, semiannually. You expect the bonds yield to maturity to decrease to 6.5% per year in two years. If you buy the bond today for $987.75 and sell it in two years, what is the annual return on your investment?

Question 9 options:

A)

9.42%

B)

9.12%

C)

8.96%

D)

8.74%

E)

9.04%