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Answer: 4.11%.
The correct answer is **C. 4.11%**. **Explanation:** The horizon yield represents the internal rate of return (IRR) for a bond investment over a specific holding period. It is calculated by equating the present value of the total return (sum of reinvested coupon payments and the sale price) to the purchase price of the bond. For this scenario: - **Purchase price (PV):** -95.27 - **Total return (FV):** 102.06 (sale price) + 24.28 (reinvested coupons) = 126.34 - **Holding period (N):** 7 years Using the IRR formula or a financial calculator: - **N = 7**, **PV = -95.27**, **FV = 126.34**, **CPT I/Y = 4.11%**. This calculation confirms that the horizon yield is closest to 4.11%. Options A and B are incorrect due to errors in the formula or input values (e.g., swapping purchase and sale prices or misapplying the holding period).
Author: LeetQuiz Editorial Team
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An investor gathers the following information about a bond investment with a 10-year tenor:
A
2.29%.
B
2.86%.
C
4.11%.
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