A Firm Issues $500 Million in Twenty-Year Bonds with an Annual

Multiple Choice

A firm issues $500 million in twenty-year bonds with an annual coupon rate of 5%.The firm makes a final payment of $145 million on the tenth and final coupon date.If the firm uses a sinking fund to repurchase some of the bond issue on each coupon payment date,what percentage of the issue must they repurchase each year?

A) 4%
B) 3.7%
C) 3.8%
D) 3.9%
E) 4.1%