Question

A bond has eight years to maturity and a coupon rate of 6.5 percent. Coupon payments are made annually and the bond has a face value of $1,000. The bond is currently selling in the market for $862. If this bond is sold at the end of four years for $1046 (ex-interest), what is the holding period return on this bond?

A. 6.5 percent

B. 12 percent

C. 9 percent

D. 6 percent

E. None of the options is correct

Answer

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