YIELD TO CALL 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 an 8% annual coupon and had a 30-year original maturity. (It matures on December 31, 2043.) There is 5 years of call protection (until December 31, 2018), 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 119.12% of par, or $1,191.20.

a. What is the yield to maturity? What is the yield to call?

b. Ifyouboughtthisbond,whichreturnwouldyouactuallyearn?Explainyour 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?