(Q. 12 IN B) A GOVERNMENT BOND CARRIES A 6% COUPON RATE, PAYS SEMI...

14. (Q. 12 in B) A government bond carries a 6% coupon rate, pays semi-annual coupons, and has a $1,000 face value. If you purchase it today at $1,015 and expect to sell it 4 years from now at $1,040, what would be your annual rate of return if the coupons are reinvested at 4% APR semi-annually compounded? A) 3.1654% B) 6.3309% C) 6.9579% D) 27.8314% Solution B