A 2-year maturity bond with face value of $1,000 makes annual coupon payments of

Question

A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $106 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is

a. 6%   

b. 10.6%

c. 12.6%                  

A 2-year maturity bond with face value of $1,000 makes annual coupon payments of $106 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is

a. 6%   

b. 10.6%

c. 12.6%                  

Explanation / Answer

c. 12.6%

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