$7-18$ YIELD TO MATURITY AND YIELD TO CALL Kempton Enterprises has bonds outstanding with a $$1,000$ face value and $10$ years left until maturity. They have an $11\%$ annual coupon payment, and their current price is $$1,185.$ The bonds may be called in $5$ years at $109\%$ of face value $($Call price $=$$$1,090).$

a$.$ What is the yield to maturity?

b$.$ What is the yield to call if they are called in $5$ years?

c$.$ Which yield might investors expect to earn on these bonds? Why?

d$.$ The bond's indenture indicates that the call provision gives the firm the right to call the bonds at the end of each year beginning in Year $5.$ In Year $5,$ the bonds may be called at $109\%$ of face value, but in each of the next $4$ years, the call percentage will decline by $1\%.$ Thus, in Year $6,$ they may be called at $108\%$ of face value; in Year $7,$ they may be called at $107\%$ of face value; and so forth. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?