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Consider a 30 year coupon bond with a face value of $1,000 that pays $55 annual...

Consider a 30 year coupon bond with a face value of $1,000 that pays $55 annual coupons (beginning one year from today). Assume that you invest each coupon in a bank that pays 7% interest. On the maturity date, how much money do you have (in total) from the bond? Suppose that you bought the bond at issue for $860.84. What is your (average) annual return on the investment over the 30 years?

A) 7.00%

B) *6.80%

C) 7.60%

D) 6.90%

E) 7.05%

CORRECT ANSWER IS B. PLEASE EXPLAIN WITH DETAIL. THANKS IN ADVANCE!

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