Generic Drugs Inc (GDI) issued 20-year debt five years ago. Because it was a risky investment (low bond rating) and the level of interest rates was relatively high five years ago, GDI had to promise to pay an interest rate of 13 percent. Recently GDI's bonds were upgraded and the level of interest rates has declined. Bonds of 15-year maturity and comparable default risk now pay 8.5 percent. GDI's VP of Finance anticipated such a possibility and included a provision in the debt covenants that gives GDI the option to call the debt at a price of $1,070 per $1,000 face value anytime after 10 years from issue. The current price of the bonds is $1,247.27 per $1,000 face value. (1) What is the yield to first call on GDI's bonds today? [Many corporate (and government) bonds are sold with an option for the issuer to call the bond (force its redemption) on or after a specified date (the date of first call). This provides the opportunity for the issuer to retire the debt before its maturity date in the event that interest rates have fallen since the debt was issued.] (2) What would a bond sell for if it did not carry a call feature?