You purchased an annual interest coupon bond one year ago that had six years remaining to maturity at that time. The coupon interest rate was 10%, and the par value was $1,000. At the time you purchased the bond, the yield to maturity was 8%. If you sold the bond after receiving the first interest payment and the yield to maturity continued to be 8%, your annual total rate of return on holding the bond for that year would have been
A. 7.00%.
B. 7.82%.
C. 8.00%.
D. 11.95%.
E. None of the options are correct.
C. 8.00%.
FV = 1,000, PMT = 100, n = 6, i = 8, PV = 1,092.46; FV = 1000, PMT = 100, n = 5, i = 8, PV = 1,079.85; HPR = (1,079.85 1,092.46 + 100)/1,092.46 = 8%.
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