One bond has a coupon rate of 5.0%, another a coupon rate of 8.0%. Both bonds pay interest annually, have 7-year maturities, and sell at a yield to maturity of 6.0%.
a. If their yields to maturity next year are still 6.0%, 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.)
Bond 1/ Bond 2
Rate of return _____%/ ______ %
b. Does the higher-coupon bond give a higher rate of return over this period??
Yes or No