Which investment should I choose? Bond K: Municipal bond, Price=$18,000, Par=$20,000, Coupon rate=7% (semiannual coupons), 10...

Which investment should I choose?

Bond K: Municipal bond, Price=$18,000, Par=$20,000, Coupon rate=7% (semiannual coupons), 10 years to maturity Bond L: Municipal bond, Price=$5,200, Par=$5,000, Coupon rate=8% (semiannual coupons), 7 years to maturity

E. Bond K

F. Bond L

G. They are equivalent, so both are the same

H. Not enough info.

Expert Solution

From above working we see that YTM for Bond K , i.e. 8.9% is greater than YTM for Bond L, i.e. 7.3%,

So, you should choose Bond K giving more return.

jeff jeffy answered 2 years ago

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