Problem:
You purchase a 7-year maturity bond with a 5% annual coupon rate and a 6% YTM. This bond can be called in 4 years with a call price of $1,040.
Required:
Question 1: Find the YTC.
Question 2: If you reinvest each coupon at a 10% interest rate, what is your actual annual return at the end of the bond's maturity? Assume that the bond will not be called.
Note: Show all workings.