Nine years ago the Templeton Company issued 15-year bonds with a 12% 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. 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.

12.39%

Explanation:

in order to determine the realized rate of return we need to calculate the yield to call:

YTC formula = {coupon + [(call price - market price)/n]} / [(call price + market price)/2]

YTC = {$120 + [($1,080 - $1,000)/9]} / [($1,080 + $1,000)/2]

YTC = $128.89 / $1,040 = 0.1239 = 12.39%

In this case, the investor's realized rate of return was actually higher than the expected yield to maturity (YTM = 12% since bonds were sold at face value).

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a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.