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    Bond Valuation Question

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    Lets assume 6-years ago, a company issued 20-yr bonds with a 14% annual coupon rate at their $1,000 par value. The bonds had a 9% call premium, with 5 years of call protection. Today, the company calls the bonds. How do I calculate the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called.

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    Solution Preview

    The payoffs to the bond holder will be as:

    Year Cash flow
    0 ...

    Solution Summary

    The solution looks at bond valuation. The rate of return for an investor is determined.