Problem 5-22 Yield to Maturity and Yield to Call ArnotInternational's bonds have a current market price of $1,350. Thebonds have an 12% annual coupon payment, a $1,000 face value, and10 years left until maturity. The bonds may be called in 5 years at109% of face value (call price = 1,090). What is the yield tomaturity? Round your answer to two decimal places. % What is theyield to call if they are called in 5 years? Round your answer totwo decimal places. % Which yield might investors expect to earn onthese bonds, and why? I. Investors would not expect the bonds to becalled and to earn the YTM because the YTM is greater than the YTC.II. Investors would not expect the bonds to be called and to earnthe YTM because the YTM is less than the YTC. III. Investors wouldexpect the bonds to be called and to earn the YTC because the YTCis less than the YTM. IV. Investors would expect the bonds to becalled and to earn the YTC because the YTM is less than the YTC.The bond's indenture indicates that the call provision gives thefirm the right to call them at the end of each year beginning inYear 5. In Year 5, they may be called at 109% of face value, but ineach of the next 4 years the call percentage will decline by 1percentage point. Thus, in Year 6 they may be called at 108% offace value, in Year 7 they may be called at 107% of face value, andso on. If the yield curve is horizontal and interest rates remainat their current level, when is the latest that investors mightexpect the firm to call the bonds?