Consider Two Bonds, Both Pay Semiannual Interest

question 9

Multiple Choice

Consider two bonds, both pay semiannual interest. Bond A has a coupon of 8% per year, maturity of 30 years, yield to maturity of 9% per year, and a face value of €1000. Bond B has a coupon of 8% per year, maturity of 30 years, yield to maturity of 9.5% per year, and a face value of €1000. Calculate the percentage gain per invested dollar for Bond A assuming a one year horizon, and a reinvestment rate of 9% per year.

• A) 9.73%
• B) 9.93%
• C) 9.20%
• D) 8.20%
• E) 9.50%

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