Consider a 20-year, 8% semi-annual coupon bond with a face value of $1,000. The bond is puttable at $900 after 10 years (i.e., right after the 20th payment). The yield to put is 7.3037% per year.

You purchase the bond at the current price and plan to hold this bond for 10 years, that is, you will sell the bond right after the 20th payment. If the market interest rate is 9% per year after 10 years (i.e., right after the 20th payment) and the reinvestment rate over the first 10 years is 8% per year, what is your annualized holding period return?

(Tip: you can either sell back to the issuer at the put price or sell on the market.)

A. 6.8%

B. 7.8%

C. 8.8%

D. 9.8%