Question: An investor must choose between two $1,000 par value bonds: Bond A pays $80 annual interest and has a market value of $800. It has

An investor must choose between two $1,000 par value bonds:

Bond A pays $80 annual interest and has a market value of $800. It has 12 years to maturity

Bond B pays $85 annual interest and has a market value of $880. It has 4 years to maturity.

a. Compute the current yield on both bonds.

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

c. Compute the approximate yield to maturity on both bonds

d. Has your answer changed in terms of which bond to select?

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