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McCue Inc. ' s bonds currently sell for $ 1 , 1 5 0 . They pay a $ 8 0 annual coupon, have a

McCue Inc.'s bonds currently sell for $1,150. They pay a $80 annual coupon, have a 25-year maturity,
and a $1,000 par value, but they can be called in 5 years at $1,040. Assume that no costs other than the
call premium would be incurred to call and refund the bonds. Also, assume that the yield curve is
horizontal, with interest rates expected to remain at current levels into the future. What is the
difference between this bond's yield to maturity (YTM) and its yield to call (YTC)?
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