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A portfolio manager purchases $5 millions of par value of a six-year bond that has a coupon rate of 4% and pays interest once per
A portfolio manager purchases $5 millions of par value of a six-year bond that has a coupon rate of 4% and pays interest once per year. The first annual coupon payment will be made one year from now. The total amount the portfolio manager will have if she (1) holds the bond until it matures six years from now, and (2) can reinvest all the annual interest payments at an annual interest rate of 5% is closest to:
A. | $1,326,595.09 | |
B. | $6,628,401.69 | |
C. | $1,360,382.56 | |
D. | $6,360,382.56 |
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