11. You have an opportunity to invest in a 10-year bond with par value of $1,000 and a 6% coupon (paid semiannually) that trades at a price of $970 or a 5-year bond with par value of $1,000 and a 5% coupon (paid semiannually) and a 6.5% annual required return.

a. Which of these two bonds would you prefer if your only decision criterion is to earn a higher annual rate of return? Please indicate in your answer by comparing the expected rates of return on the two bonds. (4 points)

b. If you decide to consider any other factor into your choice between the two bonds, what factor(s) would you consider and why? (4 points)