Exactly two years ago today, a ten-year $100,000 bond was purchased at a price of P = $102,500. The bond coupon rate is j₂ = 5 % and the bond is redeemable at 105 on July 13, 2028. The price (market value) of this bond today is $103,250.

Using the method of averages, what is the the total return on this bond over last two years?

• A.

  The total rate of return is 5.01% compounded semiannually.

• B.

  The total rate of return is 5.64% compounded semiannually.

• C.

  The total rate of return is 5.39% compounded semi-annually.

• D.

  The total rate of return is 5.22% compounded semi-annually.