Does the higher-coupon bond give higher rate of return

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Reference no: EM131968700

One bond has a coupon rate of 5.0%, another a coupon rate of 8.0%. Both bonds pay interest annually, have 7-year maturities, and sell at a yield to maturity of 6.0%.

a. If their yields to maturity next year are still 6.0%, 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 or No

Reference no: EM131968700

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