Question: You are examining two bonds, each with a par value of $10,000, as potential investments. They are: (i) Bond A: A bond with seven years

You are examining two bonds, each with a par value of $10,000, as potential investments. They are:

(i) Bond A: A bond with seven years to maturity that pays 10 percent per annum compounded semi-annually. The current market yield for this bond is 7 percent compounded semi-annually and the current market price of the bond is $7500.00

(ii) Bond B: A bond with ten years left to maturity that pays 12 percent per annum compounded semi-annually. The current market yield for this bond is 10 percent compounded semi-annually and the current market price of the bond is $4000.00

Which bond(s) should you invest in? Explain your answer fully.

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