It is now Januery 1, 2010 and Bill Nilas is considering the purchase of an outstanding $1,000 par bond that was issued on Januery 1, 2006. It has a 6 percent annual coupon and had a 10-year original maturity. It has 5 years of call protection (from time of issue), after which time it can be called at 103 percent of par. It is now selling at $960. Which of the following is most CORRECT?
a. The yield to call is 13.54 percent, but if rates do not change, the bond will probably not be called.
b. The yield to call is 13,54 percent, and if rates stay the same, the bond will probably be called once call protection expires.
c. The yield to call is 13,54 percent and the yield to maturity is 8.17 percent.
Since the YTC is greater than the YTM, the bondholders will elect to receive the YTC.
d. The yield to call is 13.54 percent, and if rates on new bonds of this type increase to 7 percent in the near future, the bond will probably be called.