Use the following information to answer the question(s)below.
Suppose you purchase a 20-year treasury bond with a 6% annual coupon ten years ago at par.Today the bond's yield to maturity has risen to 8% (EAR).
-If you hold this bond to maturity,the internal rate of return you will earn on your investment will be closest to:
A)5.0%.
B)5.6%.
C)6.0%.
D)8.0%.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) for a bond held to maturity is the original coupon rate if purchased at par. Since the bond was purchased at par with a 6% coupon rate, the IRR will be 6%.

Use the Following Information to Answer the Question(s)below