Question

Guzman owns investment A and 1 bond B. The total value of his holdings is $4,300. invetsment A is expected to pay annual cash flows to Guzman of $640 per year with the first annual cash floe exepected later today and the last annual cash floe expected in 6 years from today. Investment A has an expected return rate of 13.81 percent. Bond B pays semi annual coupons , matures in 15 years , has a face value of $1000, has a coupon rate of 9.60 percent and pays its next coupon in 6 months. what is the yield to maturity for bond B?

A 4.58% ( within .03 percentage points)

B 7.80% within .03 percentage points)

C 5.22% within .03 percentage points)

D 7.66 % within .03 percentage points)

E. none are within .03 percentage points of the correct answer

Answer 1