The Following Information Relates to Problems

question 19

Multiple Choice

The following information relates to Problems
an investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par value. after the bond is purchased and before the first coupon is received, interest rates increase to 8%. The investor sells the bond after five years. assume that interest rates remain unchanged at 8% over the five-year holding period.
-assuming that all coupons are reinvested over the holding period, the investor's five-year horizon yield is closest to:

• A) 5.66%.
• B) 6.62%.
• C) 7.12%.