Three years ago, you purchased a bond for $974.69. The bond had three 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 % 1 7.2 % 2 9.4 % 3 (maturity date) 8.2 % A) 6.43% B) 7.96% C) 8.23% D) 8.97% E) 9.13% Provide an accurate answer with justification.
Three years ago, you purchased a bond for $974.69. The bond had three 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 % 1 7.2 % 2 9.4 % 3 (maturity date) 8.2 % A) 6.43% B) 7.96% C) 8.23% D) 8.97% E) 9.13% Provide an accurate answer with justification.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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5) Three years ago, you purchased a bond for $974.69. The bond had three 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 %
1 7.2 %
2 9.4 %
3 (maturity date) 8.2 %
A) 6.43%
B) 7.96%
C) 8.23%
D) 8.97%
E) 9.13%
Provide an accurate answer with justification.
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