Converting and comparing yields of different periodicities AKA The power of compounding. A bond from company ABC is a 5-year bond paying 9% with an annual coupon costing 100.40 and a bond from company XYZ is a 5-year bond paying 9% with monthly coupons costing 101.40.

Since both bonds pay 9%, and the bond from ABC is significantly cheaper, it is better to buy that bond if both companies have the same credit.

True

False