Planning on investing in bonds

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Sarah's daughter is planning on starting college in 5 years, and Sarah is planning on investing in bonds to help her pay for her tuition when she begins college. She is choosing between two bonds: Bond A has a YTM of 10%, coupon rate of 8%, and 5 years until maturity. Bond B has a YTM of 9%, coupon rate of 16%, and 7 years until maturity. Both have a par value of $1000 and annual coupon payments. Jenny wants her investment to have qero interest rate risk. Which bond should she purchase and why?

Reference no: EM131561818

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