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ii It is now January 1, 2017, and Braeden Kobza is considering the purchase of...

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ii It is now January 1, 2017, and Braeden Kobza is considering the purchase of an outstanding bond that was issued on January 1, 2015. The bond has a 10-year original maturity and a 6 percent annual coupon (paid annually). The bond has call protection for 5 years, after which the bond can be called for 103 percent of par (or $1,030). Interest rates have decreased since the bond was issued, so the bond is now selling at $1,100. Which of the following statements is most CORRECT? a. The yield to call is 3.40 percent and the yield to maturity is 4.48 percent. Since the YTM is greater than the YTC, the bondholders will elect to hold the bond until it matures. b. The yield to maturity is 4.48 percent. If rates on new bonds of this type increase to 5.0 percent three years from now, the bond will probably not be called. c. The yield to call is only 3.40 percent, so if rates do not change in the next 3 years, the bond will probably not be called. d. The yield to maturity is 4.48 percent, so if rates stay the same for the next three years, the bond will probably be called once the call protection expires. e. None of the above

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