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An investor must choose between two bonds: Bond A pays $80.00 annual interest and has a market value fo $800. It has 10 years to maturity.

An investor must choose between two bonds:
Bond A pays $80.00 annual interest and has a market value fo $800. It has 10 years to maturity.
Bond B pays $85 annual interest and has a market value of $900. It has 2 years to maturity.
a. compute the current yield on both bonds.
b. Which bond should be select based on your answers 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 to Bond B?
d. Has your answer changed between parts b and c of this question in terms of which bond to select?

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Finance-8228715.doc

An investor must choose between two bonds:
Bond A pays $80.00 annual interest and has a market value fo $800. It has 10 years to maturity.
Bond B pays $85 annual interest and has a market value of...

Sign up to view the full answer

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