Question

Six years ago the Templeton Company issued 28-year bonds with an 13% 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.

Answer 1

Answer:

1	Call price (Here it is FV)	$                                  1,080.00
2	Coupon rate	13.00%
3	Number of compounding periods per year	1
1*2/3	Interest per period (PMT)	$                                      130.00
	Bond price (PV)	$                                -1,000.00
4	Number of years to call	6
5 = 4*3	Number of compounding periods till call (NPER)	6
	Bond Yield to call	RATE(NPER,PMT,PV,FV)
	Bond Yield to call	13.73%