Problem:
Yield to Call: Five yrs ago, company A, issued 20 yrs bonds with a 12% annual coupon rate at their $1,000 par value. The bonds had 5 yrs of call protection and an 8% call premium. Yesterday, company A called the bonds.
Required:
Question: What is the realized rate of return? Should the investor be happy calling the bond? Explain in detail and provide step by step solution.