Seven years ago the Templeton Company issued 20-year bonds with an11% annual coupon rate at their $1,000 par value. The bonds had a 7.5% call premium,with 5 years of call protection. Today Templeton called the bonds. Compute the realizedrate of return for an investor who purchased the bonds when they were issued and heldthem until they were called. Explain why the investor should or should not be happy thatTempleton called them.

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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Seven years ago the Templeton Company issued 20-year bonds with an
11% annual coupon rate at their $1,000 par value. The bonds had a 7.5% call premium,
with 5 years of call protection. Today Templeton called the bonds. Compute the realized
rate of return for an investor who purchased the bonds when they were issued and held
them until they were called. Explain why the investor should or should not be happy that
Templeton called them.

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