You are interested in buying one corporate bond and your broker has offered two corporate bonds for you to consider: 1. Bond A: paying quarterly coupons, with a maturity date of 1 January 2025, an annual coupon rate of 12% and a bond flat price of $90.0 2. Bond B: paying quarterly coupons, with a maturity date of 1 January 2035, an annual coupon rate of 15% and a bond flat price of $100.0 If the settlement date of both bonds is 1 January 2022, which of these two bonds represents the best investment opportunity? nd A
You are interested in buying one corporate bond and your broker has offered two corporate bonds for you to consider: 1. Bond A: paying quarterly coupons, with a maturity date of 1 January 2025, an annual coupon rate of 12% and a bond flat price of $90.0 2. Bond B: paying quarterly coupons, with a maturity date of 1 January 2035, an annual coupon rate of 15% and a bond flat price of $100.0 If the settlement date of both bonds is 1 January 2022, which of these two bonds represents the best investment opportunity? nd A
Chapter5: Bond, Bond Valuation, And Interest Rates
Section: Chapter Questions
Problem 24SP
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Transcribed Image Text:Question 7
You are interested in buying one corporate bond and your broker has offered two corporate bonds
for you to consider:
1. Bond A: paying quarterly coupons, with a maturity date of 1 January 2025, an annual coupon
rate of 12% and a bond flat price of $90.0
2. Bond B: paying quarterly coupons, with a maturity date of 1 January 2035, an annual coupon
rate of 15% and a bond flat price of $100.0
If the settlement date of both bonds is 1 January 2022, which of these two bonds represents the
best investment opportunity?
O Bond A
O Bond B because its redemption value is higher than Bond A
O Bond B
O Both Bond A and Bond B as they are identical
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