Current yield is better approximation of yield to maturity

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Reference no: EM131618761

Consider two $10,000 face-value corporate bonds. One is currently selling for 9,980 and matures in 15 years. The other bond sells for 9,350 and matures in.wh 15 years. The other bond sells for $9,350 and it matures in 3 years. Calculate the current yield for both bonds if both have a coupon rate equal to 5%. Which current yield is a better approximation of the yield to maturity? (Assume a yearly coupon payment.)

Reference no: EM131618761

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