A bond has a $1,000 par value, 12 years to maturity, and pays a coupon of 5.5% per year, semiannually. You expect the bonds yield to maturity to decrease to 4.5% per year in three years. If you buy the bond today for $978.50 and sell it in three years, what is the annual return on your investment?

Question 6 options:

1)

8.98%

2)

8.52%

3)

8.87%

4)

8.74%

5)

8.32%