need help answering a, b and c
It is now lanuary 1, 2019, and you are considering the purchase of an outstanding bond that was issued on January 1, 2017. It has a.7.5\% annual coupon and had a 30-year original maturity. (It matures on December 31, 2046.) There is 5 years of call protection (until December 31, 2021), after which time it can be called at 108 - that is, at 108\% of par, or $1,080. Interest rates have declined since it was issued, and it is naw selling at 119.57% of par, or 51,195,70. a. What is the yield to maturity? Do not round intermediate calculations, Round your answer to two decimal places: What is the yield to call? Do nok round intermedate calculations. Round your answer to two decimal places. b. If you bought this bond, which return would you actually earn? 1. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. II. Investors would expect the bonds to be called and to earn the YTC becouse the VTC is greater than the YTM. III. Investors would not expect the bonds to be called and to earn the YTM because the YTM is grester than the YTC IV. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. c. Suppose the bond had been selling of a discount rather than a premium. Would the yieid to maturity have been the most wikely return, or would the yield to cail have been most likely? 1. Investors would not expect the bonds to be caled and to earn the VTM because the VTM is greater than the YIC: II. Investors would not expect the bonds to be called and to earn the YTM becsuse the YTM is less than the YTC: Ii1. Investors would expect the bonds to be called and to eacn the Yre because the YTC is greater than the YTM. IV. Inveators would expect the bands to be calied and to earn the rTc becouse the YTc is less than the YTM