Question: A 20-year $1,000 par value bond has a 7% annual coupon. The bond is callable after the 10th year for a call premium of $1,025.

A 20-year $1,000 par value bond has a 7% annual coupon. The bond is callable after the 10th year for a call premium of $1,025. If the bond is trading with a yield to call of 6.25%, what is the bond’s yield to maturity?

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