Business, 21.10.2021 01:40 ThatOneGuy8144
An investor must choose between two bonds:
Bond A pays $100 annual interest and has a market value of $870. It has 12 years to maturity.
Bond B pays $70 annual interest and has a market value of $850. It has six years to maturity.
Assume the par value of the bonds is $1,000.
A drawback of 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 12.02 percent.
What is the approximate yield to maturity on Bond B?
The exact yield to maturity?
(Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)
Answers: 2
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An investor must choose between two bonds:
Bond A pays $100 annual interest and has a market value...
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