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The Z Corporation issues a 10%, 20-year bond at a time whenyields are 10%. The bond has a call provision that allows the corporation to
The Z Corporation issues a 10%, 20-year bond at a time whenyields are 10%. The bond has a call provision that allows the corporation to force a bondholder to redeem his or her bond at face value plus 5%. After 5 years the corporation ?ndsthat exercise of this call provision is advantageous.What can you deduce about the yield atthat time? (Assume one coupon payment per year.)
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