Question

Again, Inc. bonds have a par value of $1,000, a 22 year maturity, and an annual coupon rate of 13.0% with annual coupon payments. The bonds are currently selling for $982. The bonds may be called in 3 years for 113.0% of par. What quoted annual rate of return do you expect to earn if you buy the bonds and company calls them when possible?a. 11.88% b. 13.26% c. 19.21% d. 14.51% e. 17.48%

Answer 1

e.17.48%

Step-by-step explanation:

Calculation for What quoted annual rate of return do you expect to earn

Using Financial calculator

PV = $982

PMT = $130

FV = $1,130

N=3 years

Quoted annual rate of return = [PV =-982, FV = 1,130, N = 3, PMT = 130]

Quoted annual rate of return = 17.48%

Therefore the quoted annual rate of return earn if you buy the bonds and company calls them when possible will be 17.48%