Taussig Corp

question 50

Multiple Choice

Taussig Corp.'s bonds currently sell for $1,150.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?

• A)3.42%
• B)3.60%
• C)3.79%
• D)3.99%
• E)4.20%

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Definitions:

Plate Boundaries

The edges where two tectonic plates meet, characterized by geological activities such as earthquakes and volcanic eruptions.

Fault

a crack in the Earth's crust resulting from the displacement of one side with respect to the other.

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The process of sinking or settling of the Earth's surface, often due to natural geological processes or extraction of underground resources.

Formation

The process of creating something, whether geological like rock formations, or formation in general, implying an act of coming into existence.