Fincorp issues two bonds with $20-$year maturities. Both bonds are callable at $$1,050.$ The first bond is issued at a deep discount with a

coupon rate of $7\%$ and a price of $$470$ to yield $16\mathrm{.}0\%.$ The second bond is issued at par value with a coupon rate of $18\mathrm{.}00\%$

Required:

a$.$ What is the yield to maturity of the par bond?

Note: Round your answer to $2$ decimal places.

Yield to maturity

b$.$ If you expect rates to fall substantially in the next two years, which bond would you prefer to hold?

Bond with a coupon rate $7\%$

Bond with a coupon rate $18\mathrm{.}00\%$