One bond has a coupon rate of 6.0%, another a coupon rate of 8.0%. Both bonds pay interest annually, have 6-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? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.
b. Does the higher-coupon bond give a higher rate of return over this period?
Does the higher-coupon bond give a higher rate of return over this period?