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Bond ABC currently sells for $1,250 and pays a $120 annual coupon, it has a 10-year maturity, and a $1,000 par value, but bond ABC

Bond ABC currently sells for $1,250 and pays a $120 annual coupon, it has a 10-year maturity, and a $1,000 par value, but bond ABC can be called in 5 years at $1,050, immediately after that coupon payment. Assume that no costs other than the call premium would be incurred to call and refund the bonds. Assume rates expected to remain at current levels in the future. The yield to call is the closest to:

Select one:

a.

6.81%

b.

8.23%

c.

6.06%

d.

8.52%

e.

Insufficient information to determine

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