Reference no: EM132485354

Nine years ago the Templeton Companv issued 21-year bonds with a 12% annual coupon rate at their $1,000 par value. The bonds had an 8% call premium, with 5 years of call protection. Today Templeton called the bonds. Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called. Round your answer to two decimal places. Why should or should not the investor be happyr that Templeton called them?

Point I. Investors should be happy. Since the bonds have been called, investors will receive a call premium and can declare a capital gain on their tax returns.

Point II. Investors should be happy. Since the bonds have been called.r investors will no longer need to consider reinvestment rate risk.

Point III. Investors should not be happy. Since the bonds have been calledr interest rates must have fallen sufficiently such that the YTC is less than the YTM. If investors wish to reinvest their interest receiptsr theyr must do so at lower interest rates.

Point IV. Investors should be happy. Since the bonds have been called, interest rates must have risen sufficiently such that the YTC is greater than the WM. If investors wish to reinvest their interest receipts, they can now do so at higher interest rates. W Check My Work

Question 1: Nesmith Corporation's outstanding bonds have a $1,000 par value, a 12% semiannual coupon, 18 years to maturity, and a 15% YTM. What is the bond's price? Round your answer to the nearest cent.