Suppose a 10-year, 10 percent, semi annual coupon bond with a par value of $1000 is currently selling for $1,135.90, producing a yield to maturity (YTM) of 8 percent. However, the bond can be called after 5 years for a price of $1,025.
1. What is the bond's yield to call (YTC)?
2. If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?