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Mamadee2478
Apr 11, 2009, 08:05 AM
I'm trying to find the yield to call and the realized rates of return. I'm a little confused because my book doesn't tell me much. I'm not sure what to do first. Here is the problem - all I need to know is what to do first and the formula to use and I should be able to do the rest.

Seven years ago, company sold a 20 yr bond issue with a 14% annual coupon rate and a 9% call premium. Today they called the bonds. Bonds originally were sold at their face value of 1,000. Compute the realized rate of return for investors who purchased bonds when they were issued and who surrender them today in exchange for the call price.

Do I need to find the bond's valuation first and then compute the yield to call?