Question: GAMA Corp has two outstanding bond issues - Bond L and Bond S. Both bonds pay a $100 annual interest plus a $1,000 face value

GAMA Corp has two outstanding bond issues - Bond L and Bond S. Both bonds pay a $100 annual interest plus a $1,000 face value at maturity. Bond L has a maturity of 15 years and Bond S has a maturity of 1 year. The value of each of these bonds when the going rates of interest (yield to maturity) are 8% and 12% is calculated. Which of these bonds should you decide to sell today so that it gives maximum returns?

Bond L with a yield of 8%

Bond S with a yield of 8%

Bond S with a yield of 12%

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