Exhibit shows the characteristics of two annual pay bonds from the same issuer with the same priority in the event of default, and Exhibit 18.30 displays spot interest rates. Neither bond€™s price is consistent with the spot rates. Using the information in Exhibits and 18.30, recommend either Bond A or Bond B for purchase.

Justify yourchoice.

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Bond A Bond B Coupons Maturity Coupon rate Yield to maturity Price Annual 3 years 10% 10.65% 98.40 Annual 3 years 5% 10.75% 88.34 Term Spot Rates (Zero Coupon 1 year 2 year 3 year 5% 3% 11%