What is the annual return on your investment

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Reference no: EM131602283

A bond has a $1,000 par value, 12 years to maturity, and pays a coupon of 5.5% per year, semiannually. You expect the bond’s yield to maturity to decrease to 4.5% per year in three years. If you buy the bond today for $978.50 and sell it in three years, what is the annual return on your investment?

1) 8.98%

2) 8.52%

3) 8.87%

4) 8.74%

5) 8.32%

Reference no: EM131602283

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