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# Harold Reese must choose between two bonds: Bond X pays \$95 annual interest and has a market value of \$900. It has 10 years to maturity.

Harold Reese must choose between two bonds:  Bond X pays \$95 annual interest and has a market value of \$900.  It has 10 years to maturity.
Bond Z pays \$95 annual interest and has a market value of \$920.  It has two years to maturity.
a. Compute the current yield on both bonds.
b. Which bond should he select based on your answer in part a?
c. 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 X is 11.17 percent.  What is the approximate yield to maturity on Bond Z?
d. Has your answer changed between parts b and c of this question?

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