Bond A and B's coupon rates are 3% and 20% respectively, paid semi-annually. They both have 5 years to maturity and par value $100. Both bonds are issued by the same government. Currently, the zero coupon rates are:
0.5-year: 5%
1-year: 6%
1.5-year: 7%
2-year: 8%
2.5-year: 9%
3-year: 10%
3.5-year: 11%
4-year: 12%
4.5-year: 13%
5-year: 14%
The price of Bond A is $63.43. The yield of Bond A is 13.23%.
a) Can we use the yield of Bond A to compute the price of Bond B? If not, why not?
b) Will the yield of Bond B be higher or lower than that of Bond A? Compute the price and yield of Bond B.