Problemyield to call five yrs ago company a issued 20 yrs, Ask an Expert

Finance

Problem:

Yield to Call: Five yrs ago, company A, issued 20 yrs bonds with a 12% annual coupon rate at their $1,000 par value. The bonds had 5 yrs of call protection and an 8% call premium. Yesterday, company A called the bonds.

Required:

Question: What is the realized rate of return? Should the investor be happy calling the bond? Explain in detail and provide step by step solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91146053

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