Final answer:
The yield to maturity of a bond can be estimated based on the market price, face value, annual coupon, and years to maturity. Without exact calculations, the yield for the bond in question should be higher than the coupon rate and significantly higher than 10%, suggesting an option higher than 13% may be the best estimate.
Step-by-step explanation:
To determine the yield to maturity of a bond, we need to consider the current market price, the face value, the annual coupon payment, and the time to maturity. The yield to maturity represents the total return an investor will receive by holding the bond until it matures, which includes both interest payments and capital gains or losses.
In this scenario, the bond has a market price of $749.40, a face value of $1,000, pays an annual coupon of $100, and has 16 years to maturity. The yield to maturity isn't directly provided, but we can estimate it.
To find the yield to maturity, we typically would use a financial calculator or spreadsheet to perform iterative calculations, often using a trial and error method. However, for the purpose of a multiple-choice question, we must select the choice that appears most reasonable based on the information given.
Since the bond is selling for less than its face value and is offering an annual coupon higher than the price implies, the yield to maturity should be higher than the coupon rate. Given the options A) 13%, B) 14%, C) 15%, D) 16%, and E) 17%, without the exact calculation, an estimate would be a yield to maturity that is significantly higher than the coupon rate of 10% due to the discounted selling price and long time until maturity.