Al Is Trying to Decide Which of Two Bonds to Buy

question 46

Multiple Choice

Al is trying to decide which of two bonds to buy. Bond H is a 10 percent coupon, 10-year maturity,$1,000 par, January 1, 2000 issue paying annual interest. Bond F is a 10 percent coupon, 10-yearmaturity, $1,000 par, January 1, 2000 issue paying semiannual interest. The market required returnfor each bond is 10 percent. When using present value to determine the prices of the bonds, Al will find that

• A) the price of H is greater than F.
• B) the price of F is greater than H.
• C) there is no difference in price.
• D) he needs more information before determining the prices.

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