Five years ago, GSI, an oil services company headquartered in Texas, issued $10 million worth of 12% 30-year bond with the dividend payable quarterly. The bonds have a call date of this year if GSI decides to take advantage of it. If the company buys the bonds back now for $11 million, determine the rate of return that the company will make
(a) per quarter and
(b) per year (nominal).
(hint: the "call" option means the following: By spending $11 million now, the company will not have to make the quarterly bond dividend payments or pay the face value of the bonds when they come due 25 years from now.)