Given the Opportunity to Invest in One of the Three

question 60

Essay

Given the opportunity to invest in one of the three bonds listed below,which would you purchase?
Assume an interest rate of 7%.
$\begin{array}{|l|l|l|l|}\hline \text { Bond } & \text { Face Value } & \text { Armual Coupon Rate } & \text { Maturity Price } \\\hline \text { A } & € 1,000 & 4 \% & 1 \text { year } € 990 \\\hline \text { B } & € 1,000 & 7.5 \% & 17 \text { years } € 990 \\\hline C& € 1,000 & 8.5 \% & 25 \text { years } € 990\\\hline\end{array}$ C.If funds remain,one may purchase Bond C also since both Bonds B and C are underpriced.

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