18. Problem 7.18 (Yield to Maturity and Yield to Call) BOOK Kempton Enterprises has bonds outstanding with a $1,000 face value and 10 years left unti maturity. They have an 12% annual coupon payment, and their current price is $1,170 The bonds may be called in 5 years at 109% of face value (Call price = $1,090). a. What is the vield to maturity? Do not round intermediate cakulations. Round your answer to two decimal places D. What is the vield to call at they are called in 5 years? Do not round Intermediate calculations. Round your answer to two decimal places. % Which yield might investors expect to earn on these bonds? Why? 1. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. 11. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM 111. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM IV. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the VTC. d. The bord's indenture indicates that the call provision gives the firm the right to call the bonds at the end of each year beginning in Year 5. In Year 5, the bonds may be called at 109% of face value, but in each of the next years, the call percentage will decline by 1%. Thus, in Year 6, they may be called at 108% of face value: In Year 7 they may be called at 107% of race value, and so forth. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds? Do not found intermediate calculations In Year