One bond has a coupon rate of 5.8%, another a coupon rate of 8.4%. Both bonds pay interest annually, have 9-year maturities, and sell at a yield to maturity of 7.0%.

a. If their yields to maturity next year are still 7.0%, what is the rate of return on each bond? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.)

Bond 1

Bond 2

Rate of return

%

%

b. Does the higher-coupon bond give a higher rate of return over this period?

Yes

No