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You are considering the purchase of an outstanding Cookie Tronics bond that was issued 2 years ago. The

You are considering the purchase of an outstanding Cookie Tronics bond that was issued 2 years ago. The bond has a 9.5% annual coupon and a 30 year original maturity. There is a 5 year call protection after which time the bond can be called at 109 (that is, at 109 percent of par, or $1,090). Interest rates have declined since the bond was issued, and the bond is now selling at $116.75 percent of par, or $1,165.75.

A. What is the yield to maturity of the bond? What is the yield to call?
B. If you bought this bond, which return do you think you would actually earn?
C. Suppose the bond had sold at a discount. Would the yield to maturity or yield to call have been more relevant?

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