Question: You are examining two bonds, each with a par value of $1,000, as potential investments. They are: (i)Bond X:A bond with seven years to maturity

You are examining two bonds, each with a par value of $1,000, as potential investments. They are: (i)Bond X: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 $750.00 (ii)Bond Junk: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 $400.00.

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

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