Problem:

A 1,000 bond orginally issues at par maturing in exactly 10 years bears a coupon rate of 8 percent compounded annually and a market price of 1,147.20. The indenture agreement provides that the bond may be called after 5 years at 1,050. Which of the following statements are true?

Required:

1. The yeild to maturity is 6 percent.

2. The yield call is 5.45 percent

3. The bond is currently selling at a preimum, indicating that the market interest rates have fallen since the issue date.

4. The yield to maturity is less than the yield to call.

Note: Please show how to work it out.