Question
Harold Reese must choose between two bonds: Bond X pays $95 annual interest and has a market value of $900. It has 10 years to
Harold Reese must choose between two bonds: Bond X pays $95 annual interest and has a market value of $900. It has 10 years to maturity. Bond Z pays $95 annual interest and has a market value of $920. It has two years to maturity. Assume the par value of the bonds is $1,000.
Current yield on both bonds = Bond X 10.56% and Bond Z 10.33%
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 11.21 percent. What is the exact yield to maturity?
The Approximate yield to maturity is: 14.18%
What is the exact yield to maturity???
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