An investor must choose between two bonds: Bond A pays $72 annual interest and has a market value of $925. It has 10 years to maturity. Bond B pays $62 annual interest and has a mar
ket value of $910. It has two years to maturity.
Compute the current yield on Bond A.
Compute the current yield on Bond B
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 A is 8.33 percent. What is the yield to maturity on Bond B?