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What is the yield to maturity on bond z

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Reference no: EM132788945

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.

Problem a. Compute the current yield on both bonds.

Problem b. Which bond should he select based on your answer to part a?

Problem c. A drawback of current yield is that it does not consider the total life of the bond. For example, the yield to maturity on Bond X is 11.21 percent. What is the yield to maturity on Bond Z?

Problem d. Has your answer changed between parts b and c of this question?

Reference no: EM132788945

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