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It is now January 1, 2016, and you are considering the purchase of an outstanding | bond that was issued on January 1, 2014, It

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It is now January 1, 2016, and you are considering the purchase of an outstanding | bond that was issued on January 1, 2014, It has a 9% annual coupon and had a 15- oyear original maturity. (It matures on December 31, 2028.) There is 5 years of call protection (until December 31, 2018), after which time it can be called at 109-that is, at 0 m: 109% of par, or $1,090. Interest rates have declined since it was issued, and it is now selling at 111.545% of par, or $1,115.45. a. What is the yield to maturity? Round your answer to two decimal places. What is the yield to call? Round your answer to two decimal places. b. If you bought this bond, which return would you actually earn? Select the correct option. I. Investors would expect the bonds to be called and to earn the YTC because the II. Investors would not expect the bonds to be called and to earn the YTM because III. Investors would not expect the bonds to be called and to earn the YTM because IV. Investors would expect the bonds to be called and to earn the YTC because the V. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM. the YTM is greater than the YTC. the YTM is less than the YTO YTC is less than the YTM. YTM is less than the YTC. -Select-v 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? I. Investors would expect the bonds to be alled and to earn the YTC because the Il. Investors would expect the bonds to be called and to earn the YTC because the III. Investors would expect the bonds to be called and to earn the YTC because the IV. Investors would not expect the bonds to be called and to earn the YTM because V. Investors would not expect the bonds to be called and to earn the YTM because YTM is less than the YTC. YTC is greater than the YTM. YTC is less than the YTM. the YTM is greater than the YTC. the YTM is less than the YTC

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