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Calculate the effective annual yield

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Question - You purchase a 30-year 10% annual coupon corporate bond with a par value of 1,000 at a yield rate of 8%. The amount you pay for the bond is based on your (erroneous) assumption that the bond is not callable. However, it turns out that the bond actually is callable, with a call price of 1,050, and can be called by the issuing corporation after 5 years. Immediately after the 17th coupon payment, the issuing corporation redeems the bond. Calculate the effective annual yield you actually achieved on this 17-year investment.

Reference no: EM132950850

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