In 2004, BCC issued 85/8 percent debentures that will mature on December 1, 2044.

a. If an investor purchased one of these bonds ($1,000 denomination) on December 1, 2014, for $1,050, determine the yield-to-maturity. Explain why investors would be willing to pay $1,050 on December 1, 2014, for one of these bonds when they are going to receive only $1,000 when the bond matures in 2044.

b. The BCC 75/8 percent debentures are callable by the company on December 1, 2019, at $1,044.50. Determine the yield to call as of December 1, 2014, assuming that BCC calls the bonds on that date.