A U.S. Government T-bond matures in 24 years and has a face value of $100. The bond has a coupon rate of 4% paid semi-annually (the next coupon is due in 6 months). The yield on the bond is 5%. If coupons are re-invested at 2.8332% per annum, then how much interest is earned on re-invested coupons over the life of the bond? Calculate the interest as a percentage of the total cash flows received at maturity by the bondholder.

Responses

• 19%

• 17%

• 16%

• 18%