A 5 Percent Coupon Bond Has 10 Years to Maturity

question 74

Multiple Choice

A 5 percent coupon bond has 10 years to maturity and could be called in two years. If the bond is called, investors will earn 6.2 percent. The call premium is one year of coupon payments. If coupon payments are made semiannually and par value is $1,000, what is the bond's yield to maturity?

• A) 2.36 percent
• B) 4.72 percent
• C) 5.18 percent
• D) 6.49 percent

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Definitions:

Real Income

The income of an individual or group after adjusting for inflation, reflecting the true purchasing power of the income.

Bureau Of Labor Statistics

A U.S. government agency responsible for collecting, analyzing, and distributing essential statistical data related to labor market activity, working conditions, and price changes in the economy.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, typically used as an indicator of inflation.

Unemployment Rate

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