Question
A coupon bond that pays interest of 4% annually has a par value of $1,000, matures in 4 years, and is selling today at $785.
A coupon bond that pays interest of 4% annually has a par value of $1,000, matures in 4 years, and is selling today at $785. The effective rate of return you will earn on this bond if you are able to reinvest your coupon payments at the following rates: Year 1: 4.8%; Year 2: 4.5%, Year 3: 4.4%
| A. | 8.84% |
| B. | 9.61% |
| C. | 10.25% |
| D. | 10.53% |
| E. | 10.92% |
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Financial Management For Public, Health, And Not-for-Profit Organizations
Authors: Steven A. Finkler, Daniel L. Smith, Thad D. Calabrese, Robert M. Purtell
6th Edition
150639681X, 978-1506396811
