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Yield to Call and Realized Rates of Return

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Seven years ago, Goodwynn & Wolf Incorporated sold a 20 year bond issue with a 14% annual coupon rate and a 9% call premium. Today, G&W called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of return for investors who purchased the bonds when they were issued and who surrender them today in exchange for the call price.

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The response computes the realized rate of return on a called bond with a 20 year issue.

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Seven years ago, Goodwynn & Wolf Incorporated sold a 20 year bond issue with a 14% annual coupon rate and a 9% call premium. Today, G&W called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of return for investors ...

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