Gilligan Co

question 93

Multiple Choice

Gilligan Co.'s bonds currently sell for $1,150.They have a 6.75% annual coupon rate and a 15-year maturity, and are callable in 6 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, the YTC or the YTM?

• A) 3.92%
• B) 4.12%
• C) 4.34%
• D) 4.57%
• E) 4.81%

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Definitions:

S Cones

A type of photoreceptor in the eye that is sensitive to short wavelength light, contributing to color vision.

Cones

Photoreceptor cells in the retina of the eye that are responsible for color vision and function best in relatively bright light.

Rods

Photoreceptor cells in the retina of the eye that are sensitive to low light levels and provide black-and-white vision.

Amplitude Waves

Amplitude waves refer to the magnitude or height of a wave, which reveals the amount of energy carried by the wave.