John has the opportunity to buy one of two bonds:

1. ABC Company one year bond with a face value of $100 for $97. The coupon rate on the bond is 4%.

OR

2. XYZ Company one year bond with a face value of $100 for $103. The coupon rate on the bond is 7%.

Also answer:

A) What is the current yield of each bond?

B) What is the yield of maturity of each bond?

C) John plans to hold the bond until maturity, which bond do you recommend that he purchase.

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