Doug Has Been Approached by His Broker to Purchase a Bond

question 36

Multiple Choice

Doug has been approached by his broker to purchase a bond for $795. He believes the bond should yield 8%. The bond pays 5% annual coupon rate and has 12 years left until maturity. What should Doug's analysis of the bond indicate to him?

• A) The bond is undervalued, purchase
• B) The bond is undervalued, do not purchase
• C) The bond is overvalued, purchase
• D) The bond is overvalued, do not purchase

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Definitions:

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The practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people, especially from an online community.

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