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What rate of return should an investor expect

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Question - K Co.'s bonds currently sell for $1,150. They have a 6.75% semi-annual coupon rate and a 15-year maturity and are callable in 6 years at $1,067.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and 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, the YTC or the YTM? Why?

Reference no: EM133030497

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