Nine years ago the Templeton Company issued 29year bonds wit

Nine years ago the Templeton Company issued 29-year bonds with an 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.

Solution

The bond got called at a Px=108 (or $1080). Coupon was 12% or $120 per year. Throw it into your financial calculator with n=9, FV=1080, PV=-1000, pmt=120, and solve for i.

Realised return=12.53%

If you want I will calculate manually.

Thanks