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C). It is now January 1, 2009, and you are considering the purchase of an outstanding bond that was issued on January 1, 2007. It

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C). It is now January 1, 2009, and you are considering the purchase of an outstanding bond that was issued on January 1, 2007. It has a8.5 percent annual coupon and had a 30-year original maturity. (It matures on December 31, 2036.) There was 5 years of call protection (until December 31, 2010), after which time it can be called at 111 (that is, at 111 percent of par, or $1,110). Interest rates have declined since it was issued, and it is now selling at 116.575 percent of par, or $1165.75 [41 a. What is the yield to maturity? What is the yield to call? b. If you bought this bond, which retur do you think you would actually eam? Explain your reasoning c. Suppose the bond had been selling at a discount rather than a premium. Would the yield to maturity then have been the most likely actual retum, or would the yield to call have been most likely

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