Brown & Co. issued seven-year bonds two years ago that can be called after two years. The bonds make...

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Brown & Co. issued seven-year bonds two years ago that can be called after two years. The bonds make semiannual coupon payments at a coupon rate of 7.875 percent. Each bond has a market value of $1,053.40, and the call price is $1, XXXXXXXXXXIf an investor purchased the bonds at par value when they were originally issued and the bonds are called by the firm today, what is the investor’s realized yield?(

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Solution:
Solution:
I
Investor’s realized yield= = 23.25%/2 
Investor’s realized yield= 11.81%
Purchase Price of bond = $1000
Year =2
Coupon Rate = 7.875%
Frequency of payment = 2
Annual Coupon = 1000*(.07875/2) = $39.375
Current Market Price = $1053.40
Call price = $1078.

Brown & Co. issued seven-year bonds two years ago that can be called after two years. The bonds make semiannual coupon payments at a coupon rate of 7.875 percent. Each bond has a market value of...

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