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What rate of return should an investor expect

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Hoffmeister Corp.'s bonds currently sell for $1,150 and have a $1,000 par value. They have a 6.25% annual coupon rate and a 15-year maturity, but they can be called in 5 years at $1,062.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds?

Reference no: EM131537188

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