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A Bond Has a Par Value of $1,000, a Time

Question 74

Multiple Choice

A bond has a par value of $1,000, a time to maturity of 20 years, a coupon rate of 10% with interest paid annually, a current price of $850, and a yield to maturity of 12%. Intuitively and without using calculations, if interest payments are reinvested at 10%, the realized compound yield on this bond must be


A) 10.00%.
B) 10.9%.
C) 12.0%.
D) 12.4%.
E) None of the options are correct.

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