Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 69

Four years ago, Chevron issued $5 million worth of debenture bonds with a coupon rate of 10% per year, payable semiannually. Market interest rates dropped, and the company called the bonds (i.e., paid them off in advance) at a 10% premium on the face value. Therefore, it cost the corporation $5.5 million to retire the bonds. What semiannual rate of return did an investor make who purchased a $5000 bond 4 years ago and held it until it was called 4 years later