An 81/2 30-year US corporate bond is callable in 12 years. It is currently sold at a price of $960. The call premium is 10 percent. The prevailing market interest rate at the call date is 8 percent.
a. What is the yield to call to an investor who does not reinvest the call price at the prevailing interest rate at the call date?
b. What is the yield to call to an investor who reinvests the call price at the prevailing interest rate at the call date?