It is now January 1, 2015, and you are considering the purchase of an outstanding bond that was issued on January 1, 2013. It has a 9.5% annual coupon and has a 30 year maturity. (It matures on December 31, 2042.) There is a 5 years of call protection (until December 31, 2017), after which time it can be called at 109 - That is, at 109% of par, or $1,090. Interest rates have declined since it was issued, and it is now selling at 116.575% of par, or $1,165.75.

A: What is the yield to maturity? What is the yield to call?

B: If you bought this bond, which return would you actually earn? Explain your reasoning

C: Suppose the bond had been selling at a discount rather than a premium. Would the yield to maturity have been the most likely return, or would the yield to call have been most likely?