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
No