7A-16. Assume that the State of Florida sold tax-exempt, zero coupon bonds with a $1,000 maturity value 5 years ago. The bonds had a 25-year maturity when they were issued, and the interest rate built into the issue was a nominal 8 percent, compounded semiannually. The bonds are now callable at a premium of 4 percent over the accrued value. What effective annual rate of return would an investor who bought the bonds when they were issued and who still owns them earn if they were called today? a. 4.41% b. 6.73% c. 8.25% d. 9.01% e. 9.52%
7A-16. Assume that the State of Florida sold tax-exempt, zero coupon bonds with a $1,000 maturity value 5 years ago. The bonds had a 25-year maturity when they were issued, and the interest rate built into the issue was a nominal 8 percent, compounded semiannually. The bonds are now callable at a premium of 4 percent over the accrued value. What effective annual rate of return would an investor who bought the bonds when they were issued and who still owns them earn if they were called today? a. 4.41% b. 6.73% c. 8.25% d. 9.01% e. 9.52%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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7A-16. Assume that the State of Florida sold tax-exempt, zero coupon bonds
with a $1,000 maturity value 5 years ago. The bonds had a 25-year
maturity when they were issued, and the interest rate built into the
issue was a nominal 8 percent, compounded semiannually. The bonds are
now callable at a premium of 4 percent over the accrued value. What
effective annual
when they were issued and who still owns them earn if they were called
today?
a. 4.41%
b. 6.73%
c. 8.25%
d. 9.01%
e. 9.52%
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