It is now january 1 2012 and you are considering the


It is now January 1, 2012, and you are considering the purchase of an outstanding bond that was issued on January 1, 2008. It has a 7 percent annual coupon and had a 30-year original maturity. (It matures on December 31, 2037.) There were 8 years of call protection (until December 31, 2015), after which time it can be called at 109.5 percent of par, or $1,095. Interest rates have increased since the bond was issued, and it is now selling at 87 percent of par, or $870. 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?

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Financial Management: It is now january 1 2012 and you are considering the
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