In: Finance
AEP's bonds currently sell for $955. They have a 7.21% annual
coupon rate and a 30-year maturity. What rate of return should an
investor expect to earn if he or she purchases these bonds?
Group of answer choices
7.59%
13.00%
10.07%
8.75%
9.14%
Annual coupon=1000*7.21%
=$72.1
Hence Approx Yield to maturity=[Annual coupon+(Face value-Present value)/time to maturity]/(Face value+Present value)/2
=[72.1+(1000-955)/30]/(1000+955)/2
which is equal to
=7.59%(Approx)=rate of return