A 20-year maturity, 8% coupon bond paying coupons semiannually is callable in five years at a call price of $1,100. The bond currently sells at a yield to maturity of 7%.
(a) What is the yield to call?
(b) What is the yield to call if the call price is only $1,050? Provide intuition for your answer.
(c) What is the yield to call if the call price is $1,100 but the bond can be called in two years instead of ve years.