BANK ABC purchased a corporate bond with a coupon rate of 5.5% and a face value of $1000. It has 11 years to maturity and is currently selling in the market for $821.53. The bond makes annual coupon payments. BANK ABC is planning on selling this bond at the end of 5 years for $934.86 (ex-interest). What is the holding period yield (HPY) on this bond?   4.7% 5.5% 7% 8% 9%

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Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.