A 20-Year Maturity Corporate Bond Has a 6

A 20-year maturity corporate bond has a 6.5% coupon rate (the coupons are paid annually) . The bond currently sells for $925.50. A bond market analyst forecasts that in 5 years yields on such bonds will be at 7%. You believe that you will be able to reinvest the coupons earned over the next 5 years at a 6% rate of return. What is your expected annual compound rate of return if you plan on selling the bond in 5 years?

A) 7.37%
B) 7.56%
C) 8.12%
D) 8.54%

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