Question: A 100 par value bond maturing in 5 years pays a 6% coupon. A put option on the bond expiring in 2 months has a

A 100 par value bond maturing in 5 years pays a 6% coupon. A put option on the bond expiring in 2 months has a strike price of 98.70 and a premium of 2.25. At what yield to maturity is the bond if the put option is at breakeven (profit/loss = 0)?

Answers:

A. 6.31%

B. 6.85%

C. 6.00%

D. 5.78%

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