Taussig Corp.'s bonds currently sell for $975. They have a 5.75% annual coupon rate and a 25-year maturity, but they can be called in 5 years at $1,085.50. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. Under these conditions, what rate of return should an investor expect to earn if he or she purchases these bonds?

a. 2.97%

b. 3.16%

c. 3.73%

d. 6.31%

e. 5.94%

Assume that you are considering the purchase of a 15-year, noncallable bond with an annual coupon rate of 9.1%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 8.7% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?

a. $1,042.21

b. $1,021.70

c. $659.47

d. $1,065.98

e. $1,033.16