An investor must choose between two bonds:

Bond A pays $95 annual interest and has a market value of $860. It has 11 years to maturity.

Bond B pays $83 annual interest and has a market value of $790. It has five years to maturity.

Assume the par value of the bonds is $1,000.

a. Compute the current yield on both bonds. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

b. Which bond should she select based on your answers to part a?

	Bond A
	Bond B

c. A drawback of current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.76 percent. What is the approximate yield to maturity on Bond B? The exact yield to maturity? (Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

d. Has your answer changed between parts b and c of this question in terms of which bond to select?

	Yes
	No

Art investor must choose between two bords Band Apays sas annual interest and has a market value af saGa. has 11 years to maturity. Bond B pays s83 nnual interest and has a market value of S790. ithas five years to maturity. Assume tho par vaue otthc bonds is $1,000 a. Complule lhe current yiekd on bolt bonds (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. nnt Yinld Bond A Bond B b. Which bond should she select based on your answers lo part d? Band A O Bund B c. A dravtlack of cu ield it does n ol consider the lolal ife of lhe bond Far example, lhe approximale yield to malurily on Bond A is 76 percent What e approximale yieki lo malurity on Rond B? The exact yield la malurily? (U compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. nput your answers as a percent rounded to 2 decimal place Apprnximate yiac to maturity Exact yield to maturity Has your answer changed between parts D and cof this question in terms of which bond to select? O Yes O No PP tion form