Harold Reese must choose between two bonds:

Bond X pays $82 annual interest and has a market value of $710. It has 10 years to maturity.

Bond Y pays $88 annual interest and has a market value of $750. It has five years to maturity.

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

1. Compute the current yield on both bonds.

Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.

Current Yield
Bond X	11.55 selected answer correct
Bond Z	11.73 selected answer correct

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

1. multiple choice 1

Bond Z Correct

Bond X

A drawback of current yield is that it does not consider the total life of the bond. For example, the yield to maturity on Bond X is 13.44 percent. What is the yield to maturity on Bond Y?

Note: 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.

Approximate yield to maturity
Exact yield to maturity	16.53 %

Approximate yield to maturity 15.77selected answer incorrect%Exact yield to maturity16.53selected answer correct%

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

1. multiple choice 2

Yes Correct

No