What is the rate of return on each bond

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Reference no: EM131049334

One bond has a coupon rate of 7.8%, another a coupon rate of 9.4%. Both bonds pay interest annually, have 7-year maturities, and sell at a yield to maturity of 7.0%.

a. If their yields to maturity next year are still 7.0%, 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.)

Rate of return

Bond 1 %

Bond 2 %

b. Does the higher-coupon bond give a higher rate of return?

Yes

Reference no: EM131049334

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