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%