Recycler Battery Corporation (RBC) sold zero coupon bonds for $214.50 each 5 years ago. RBC's zeros were issued with a 20-year maturity and a $1,000 par value. The bonds is redeemable at a premium of 7% above their accumulated value on the call date, ten years after the issue date. What average rate of return does an investor who buys the bonds today hope to gain if they sell for $239.39 in the market? a. 15.7% b. 12.4% c. 10.0% d. 9.5% e. 8.0%

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A:

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