It is now January 1, 2013, and you are considering the purchase of an outstanding bond that was issued on January 1, 2010. It has a 7 percent annual coupon and had a 30-year original maturity. (It matures on December 31, 2039.) There were 8 years of call protection (until December 31, 2017), after which time it can be called at 107 percent of par, or $1,070. Interest rates have fallen since the bond was issued, and it is now selling at 112 percent of par, or $1,120. If you bought this bond, what rate of return would you probably earn, assuming you hold the bonds until they either mature or are called?

a.

4.28%

b.

6.18%

c.

5.45%

d.

6.08%

e.

7.00%