Harold Reese must choose between two bonds: Bond X pays $79annual interest and has a market value of $860. It has 12 years tomaturity. Bond Z pays $89 annual interest and has a market value of$820. It has six years to maturity. Assume the par value of thebonds is $1,000. a. Compute the current yield on both bonds. (Donot round intermediate calculations. Input your answers as apercent rounded to 2 decimal places.) Current Yield Bond X % Bond Z% b. Which bond should he select based on your answers to part a?Bond Z Bond X c. A drawback of current yield is that it does notconsider the total life of the bond. For example, the approximateyield to maturity on Bond X is 9.90 percent. What is theapproximate yield to maturity on Bond Z? The exact yield tomaturity? (Use the approximation formula to compute the approximateyield to maturity and use the calculator method to compute theexact yield to maturity. Do not round intermediate calculations.Input your answers as a percent rounded to 2 decimal places.)Approximate yield to maturity % Exact yield to maturity % d. Hasyour answer changed between parts b and c of this question? NoYes
