Zevo Corp. bonds have a coupon rate of 7%, a yield to maturity of 10%, a face va

Question

Zevo Corp. bonds have a coupon rate of 7%, a yield to maturity of 10%, a face value of $1,000, and mature in 10 years. Which of the following statements is most correct? Answer A)An investor who purchases the bond today will earn a return of 7% if he sells the bond after one year. B)An investor who purchases the bond today will earn a return of 10% if he sells the bond after one year. C)An investor who purchases the bond today will earn a return of 17% per year if he holds the bond until it matures. D)An investor who purchases the bond today will earn a return of 10% per year if he holds the bond until it matures.

Explanation / Answer

D)An investor who purchases the bond today will earn a return of 10% per year if he holds the bond until it matures.

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