Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Taussig Corp.'s bonds currently sell for $1,140. They
have a 6.35% annual coupon rate and a 20-year
maturity, but they can be called in 5 years at $
1,067.50. Assume that no costs other than the call
premium would be incurred to call and refund the
bonds, and also assume that the yield curve is
horizontal, with rates expected to remain at current
levels on into the future. Under these conditions, what
rate of return should an investor expect to earn if he or
she purchases these bonds?
4.19% 3.61% 3.96% 4.41 % 4.93%
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