Bond Price @8% Price @7% Percentage $100 perpetuity 7-8 YIELD TO CALL Seven years ago the Templeton Company issued 20-year bonds with an 11% annual coupon rate at their $1,000 par value. The bonds had a 7.5% 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. Explain why the investor should or should not be happy that Templeton called them. 7-9 YIELD TO MATURITY Harrimon Industries bonds have 6 years left to maturity Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%. a. What is the yield to maturity at a current market price of (1) $865 and (2) $1,166? b. Would you pay $865 for each bond if you thought that a "fair" market interest rate for such bonds was 12%--that is, if rd 12%? Explain your answer 7-10