DEFERRED COUPON BONDS ARE BONDS WHOSE COUPON PAYMENTS ARE DEFERRED...
15. Deferred coupon bonds are bonds whose coupon payments are deferred for
a specified number of years. That is, there are no coupon payments during the
deferred period. Consider a 15-year deferred coupon bond with $1,000 face
value. The deferred period is the first 5 years in the life of the bond. After the
deferred period, the issuer will pay X% of the par as annual coupons (i.e.
coupons are paid once per year) until maturity to bond investors, with the first
payment occurring 1 year after the deferred period. The bond is yielding 7%
annually and selling for $926.21. What is the value of X?
A) 10.54%
B) 11.26%
C) 12.05%
D) 12.55%