It is now march 1, 2001 and you are considering the purchase of an outstanding Kramerko bond with a par value of $1000 that was issued March 1, 1999. the Kreamerko bond has a 9.5 percent annual coupon and a 30-year original maturity (it matures on February 28, 2029). there is a 5-year call protection period(until February 28, 2014), after which the bond can be called at $1090. Interest rates have declined since the bond has been issued, and the bond is currently selling at $1165.75
1. What is the yield to maturity now in 2001 for the Kramerko bond?
2. What is the yield to call now in 2001 for the Kramerko bond?
3. If you bought this bond, which return do you think you would actually earn? Explain your reasoning
4. Suppose the bond has sold at a discount. Would the yield to maturity or yield to call have been more relevant?