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Please help with question a, specifically, why is the yield to maturity of the par bond higher than the yield of the discount bond? 7.

Please help with question a, specifically, why is the yield to maturity of the par bond higher than the yield of the discount bond?

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7. XYZ issues two bonds with 20-year maturities. Both bonds are callable at $1,050. The first bond is issued at a deep discount with a coupon rate of 4% and a price of $580 to yield 8.4%. The second bond is issued at par value with a coupon rate of 89/4%. a. What is the yield to maturity of the par bond? Why is it higher than the yield of the discount bond

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