Click here to read the eBook: Bond Yields YIELD TO CALL Ten years ago the Templeton Company issued 25-year bonds with an 9% annual coupon rate at their $1,000 par value. The bonds had an 6% call premium, with 5 years of call protection. Today Templeton called the bonds. a. Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were called. Round your answer to two decimal places. b. Why the investor should or should not be happy that Templeton called them. 1. Since the bonds have been called, interest rates must have risen sufficiently such that the YTC is greater than the YTM. If investors wish to reinvest their interest receipts, they can now do so at higher interest rates. IL. Since the bonds have been called, Interest rates must have risen sufficiently such that the YTC is greater than the YTM. If investors wish to reinvest their interest receipts, they must do so at lower interest rates. III. Since the bonds have been called, Investors will receive a call premium and can declare a capital gain on their tax returns. IV. Since the bonds have been called, investors will no longer need to consider reinvestment rate risk V. Since the bonds have been called, Interest rates must have fallen sufficiently such that the YTC is less than the YTM. If investors wish to reinvest their interest receipts, they must do so at lower interest rates. -Select- BOND VALUATION Bond X is noncallable and has 20 years to maturity, a 9% annual coupon, and a $1,000 par value. Your required return on Bond X is 12%; If you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 10%. How much should you be willing to pay for Bond X today? (Hint: You will need to know how much the bond will be worth at the end of 5 years.) Do not round Intermediate calculations. Round your answer to the nearest cent