Keep the Highest: 12 3. Problem 7.08 Click here to read the eBook: Bond Yields YIELD TO CALL Six years ago the Templeton Company issued 18-year bonds with an 13% annual coupon rate at their $1.000 par value. The bonds had an 8% call premium, with 5 years of call protection. Today Templeton called the bonds. a. Compute the realized rate of return for an investor who purchased the bonds when they were issued and held them until they were calied. Round your answer to two decimal places. AGE UNLIM b. Why the investor should or should not be happy that Templeton called them. I Since the bonds have been called, interest rates must have risen sulfidently such that the YT is greater than the YTH. If investors wish to reinvest their interest receipts, they can now do so at higher interest rates II. Since the bonds have been called, interest rates must have risen sufficiently such that the YT is greater than the YTM. If investors wish to reinvest their interest receipts, they must do so at lower interest rates III. Since the bonds have been called, investors will receive a call premium and can declare a capital gain on their tax returns IV. Since the bonds have been called, investors will no longer need to consider reinvestment rate tisk V. Since the bonds have been called, Interest rates must have fallen sulfidently such that the YT is less than the YTH. Investors wish to reinvest their interest receipts, they must do so at lower interest rates. rader Now S CORT forces - 6 . 0