a. The coupon rate
b. The current rate
c. The approximate yield to maturity
a. Compute the current yield on both bonds.b. Current yield = Annual interest payment / Current Bond Price
b. Based on your computations above, which bond should the investor select?
c. A drawback on the current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.30%. What is the approximate yield to maturity on Bond B?
d. Has your answer changed between parts “b” and “c” of this question in terms of which bond to select? Explain.
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