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Taussig Corp. ' s bonds currently sell for $ 1 , 1 4 0 . They have a 6 . 3 5 % annual coupon

Taussig Corp.'s bonds currently sell for $1,140. They have a 6.35% annual coupon rate and
a 20-year maturity, but they can be called in 5 years at $1,067.50. Assume that no costs
other than the call premium would be incurred to call and refund the bonds, and also
assume that the yield curve is horizontal, with rates expected to remain at current levels
on into the future. Under these conditions, what rate of return should an investor expect
to earn if he or she purchases these bonds?
4.19%
3.61%
3.96%
4.41%
4.93%

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