Save Submit Assignment for Gra Problem 6.09 Check My Wo Click here to read the eBook: The Determinants of Market Interest Rates EXPECTED INTEREST RATE The real nsk-free rate is 2.05%. Inflation is expected to be 3.15% this year, 4.7% next year, and 2.75% thereafter. The maturity risk premium is estimated to be 0.05 x t-1 %, where t number of years to maturity. What is the yield on a 7-year Treasury note? Do not round your intermediate calculations. Round your answer to two decimal places Check My Work O Icon Key Problem 6.09 Check My Work Click here to read the eBook: Bond Yields YIELD TO CALL Six years ago the Templeton Company issued 18-year bonds with an 15% annual coupon rate at their $1,000 par value. The bonds had an 996 cal 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 called. Round your answer to two decimal places. Il premium, with 5 years of call protection. Today 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 sufficiently such that the YTC is greater than the YTM. If investors wish to reinvest their interest receipts, they can now do so at higher interest rates. Since the bonds have been called, interest rates must have risen sufficiently such that the lower interest rates C s greater than the YTM rinvestors wish to en est her terestre ce s the must do so at 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 risk V. Since the bonds have been called, interest rates must have fallen sufficiently such that the YTC is less than the YTM. If investors wish to reinvest their interest receipts, they must do so at lower interest rates. -Select- Check My Work Icon Key