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Taussig Corp.s bonds currently sell for $1,280. They have a 7.5% annual coupon rate and a 20-year ...

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Taussig Corp.s bonds currently sell for $1,280. They have a 7.5% annual coupon rate and a 20-year ...

Taussig Corp.’s bonds currently sell for $1,280. They have a 7.5% annual coupon rate and a 20-year maturity, but they can be called in 9 years at $1,175. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels into the future. Under these conditions, what rate of return should investors expect to earn if they purchase these bonds?

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4.83%

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5.12%

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5.40%

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5.95%

Textbook

Financial Management: Theory and Practice

Edition: 4^th

Authors: Brigham, Ehrhardt, Gessaroli, Nason

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