It is now January 1, 2013, and you are considering the purchase of an outstanding bond that was issued on January 1, 2009.  It has a 7 percent annual coupon and had a 30-year original maturity.  (It matures on December 31, 2038.)  There were 9 years of call protection (until December 31, 2017), after which time it can be called at 106 percent of par, or $1,060.  Interest rates have fallen since the bond was issued, and it is now selling at 117 percent of par, or $1,170.  If you bought this bond, what rate of return would you probably earn, assuming you hold the bonds until they either mature or are called?   a. 5.82%   b. 4.26%   c. 7.00%   d. 5.73%   e. 3.26%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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  1. It is now January 1, 2013, and you are considering the purchase of an outstanding bond that was issued on January 1, 2009.  It has a 7 percent annual coupon and had a 30-year original maturity.  (It matures on December 31, 2038.)  There were 9 years of call protection (until December 31, 2017), after which time it can be called at 106 percent of par, or $1,060.  Interest rates have fallen since the bond was issued, and it is now selling at 117 percent of par, or $1,170.  If you bought this bond, what rate of return would you probably earn, assuming you hold the bonds until they either mature or are called?
      a.
    5.82%
      b.
    4.26%
      c.
    7.00%
      d.
    5.73%
      e.
    3.26%
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