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Which current yield is a better approximation of the yield

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Reference no: EM132672462

Problem 1: Consider two $10,000 face value corporate bonds. Bond A is currently selling for $9,980 and matures in 15 years. Bond B sells for $9,350 and 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).

A. None of the above
B. Bond B
C. Both
D. Bond A

Reference no: EM132672462

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