Question: Masters Corp. It issues two 18-year bonds. Both bonds are callable at $1,060. The first bond is issued at a deep discount, yielding 14.9% at

Masters Corp. It issues two 18-year bonds. Both bonds are callable at $1,060. The first bond is issued at a deep discount, yielding 14.9% at a coupon rate of 8%. The second bond is issued at nominal value with a coupon rate of 16.50%.

A. What is the yield to maturity of the bond? (Round your answer to 2 decimal places.)

yield to maturity %

B. If you expect rates to drop significantly over the next two years, which bond would you choose to hold?

	16.50% Coupon Bonds
	8% coupon rate bond

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