1.00 points

One bond has a coupon rate of 7.8%, another a coupon rate of 9.4%. Both bonds pay interest annually, have 7-year maturities, and sell at a yield to maturity of 7.0%.

a.

If their yields to maturity next year are still 7.0%, what is the rate of return on each bond? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.)

Rate of return Bond 1 % Bond 2 %

b. Does the higher-coupon bond give a higher rate of return?

Yes No