Fitzgerald's

30-year

bonds pay

9

percent interest annually on a

$1,000

par value. If the bonds sell at

$825,

what is the bond's yield to maturity? What would be the yield to maturity if the bonds paid interest semiannually? Explain the difference.

Question content area bottom

Part 1

a. The bond's yield to maturity if the bond pays interest annually is

enter your response here%.

(Round to three decimal places.)

Part 2

b.The bond's yield to maturity if the bond paid interest semiannually would be

enter your response here%.

(Round to three decimal places.)

Part 3

c.Based on the findings in parts a and

b,

which of the following statements is correct?(Select the best choice below.)

A.

Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a discount.

B.

Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a premium.

C.

Other things being equal, the YTM is higher for an annual bond than a semiannual bond if the bond is selling at a discount.

D.

Other things being equal, the YTM is higher for a semiannual bond than an annual bond if the bond is selling at a discount.