If I have two bonds A and B:
Bond A - Face value of $100, 1 year maturity, and sells for $95
Bond B - Face value $100, 1 year maturity, pays 6% per yr and sells for $94
1. What are the differences between the two (type of bonds)?
2. How do I calculate the yield to maturity for both?
3. Which has a higher Y.T.M. and why?
4. What would be the real return on bond A and B if the actual inflation rate is 3%?