Harold Reese must choose between two bonds:

Bond $x$ pays $$80$ annual interest and has a market value of $$855.$ It has $12$

years to maturity.

Bond $Z$ pays $$70$ annual interest and has a market value of $$880.$ It has four

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.$)$

Answer is complete and correct.

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

Bond $x$

Bond Z

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 X is $10\mathrm{.}09$

percent. What is the approximate yield to maturity on Bond Z$?$ The exact

yield to maturity? $($ Do not round intermediate calculations. Input your

answers as a percent rounded to $2$ decimal places.$)$

Answer is complete but not entirely correct.

d$.$ Has your answer changed between parts $b$ and $c$ of this question?

Yes