A 10 Percent Coupon Bond Has 15 Years to Maturity

A 10 percent coupon bond has 15 years to maturity and could be called in two years. If the bond is called, investors will earn 4 percent. The call premium is one year of coupon payments. If coupon payments are made annually and par value is $1,000, what is the bond's yield to maturity?

A) 6.19 percent
B) 6.82 percent
C) 7.65 percent
D) 7.98 percent

Correct Answer:

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