It is now January 1, 2019, and you are considering the purchase of an outstanding bond that was issued on January 1, 2017. It has a 9.5% annual coupon and had a 20-year original maturity. (It matures on December 31, 2036.) There is 5 years of call protection (until December 31, 2021), after which time it can be called at 108that is, at 108% of par, or $1,080. Interest rates have declined since it was issued, and it is now selling at 116.54% of par, or $1,165.40.

1. What is the yield to maturity?

2. What is the yield to call?

3. If you bought this bond, which return would you actually earn?

-Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.

-Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.

-Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.

-Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.