What is the approximate yield to maturity on bond 2

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Question :

Harold Reese must choose between two bonds: Bond X pays $92 annual interest and has a market value of $890. It has 10 years to maturity.

Bond 2 pays $85 annual interest and has a market value of $760. It has four years to maturity. Assume the par value ofthe bonds is $1,000.

a. A drawback of current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond X is 11.03 percent. What is the approximate yield to maturity on Bond 2? The exact yield to maturity?

b. Has your answer changed between parts b and c of this question?

Reference no: EM132406592

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