An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. After the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. Assume that interest rates remain unchanged at 8% over the five-year holding period.

Assuming that all coupons are reinvested over the holding period, the investor's five-year horizon yield is closest to:

1. 5.66%

2. 6.62%

3. 7.12%