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An investor buys a 20-year, $1,000 bond with 8% semiannual coupons to yield 10% (nominal annual rate convertible semiannually). The bond is callable at any
An investor buys a 20-year, $1,000 bond with 8% semiannual coupons to yield 10% (nominal annual rate convertible semiannually). The bond is callable at any time and there is no call premium (i.e. callable at par value of $1,000). If the bond is called after 5 years, calculate the gain to the investor, which is the difference between the call price of the bond (the price paid by the bond issuer to redeem the bond early) and the amortized book value of the bond. A $142 B $148 $154 D $160 E $166
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