An investor is considering buying a bond named CCC. Bond CCC pays 11% semi-annual coupon, it has 15 years to maturity and the current price of this bond is $1,144.88. This bond is callable at the end of year 4 (the first and only call date). The call price of the bond is $1,122.90. What is the RTC for this bond? Suppose our investor’s investment horizon is only 6 years (a period extending beyond the first call date, but shorter than the maturity of the bond). Also assume that this investor believes that she can invest all proceeds @ 7%. 

(a) Compute the total return of the bond on the assumption that the bond is called in 4 years. 

(b) Compute the total return of the bond on the assumption that the bond is not called and lives until maturity.