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Two years ago, you purchased a bond for $1036.67. The bond had two years to maturity, a coupon rate of 8%, paid annually, and a
Two years ago, you purchased a bond for $1036.67. The bond had two years to maturity, a coupon rate of 8%, paid annually, and a face value of $1,000. Each year, you reinvested all coupon interest at the prevailing reinvestment rate shown in the table below. Today is the bond's maturity date. What is your realized compound yield on the bond?
Time | Prevailing Reinvestment Rate |
0 (purchase date) | 6.0% |
End of Year 1 | 7.2% |
End of Year 2 (maturity date) | 8.2% |
Select one:
a. 6.04%
b. 6.43%
c. 6.00%
d. 7.03%
e. 5.96%
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