Question
In: Finance
ABC company has two bonds outstanding bond A and bond B. Bond A is a 20...
ABC company has two bonds outstanding bond A and bond B. Bond A is a 20 years semi-annual bond, which was issued 10 years ago with a $1000 par value and coupon interest rate of 8%. Bond B, on the other hand, is a 35-year annual bond, which was issued 20 years ago with a $1000 par value and coupon interest rate of 14%. The market price of bond A and bond B are $ 900 and $ 1100 respectively. Currently the yield to maturity on similar risk investments is 12 percent.
a) What is the value of bond A today?
b) What is the value of bond B today?
c) As a potential investor which bond would you choose to buy and why?
Solutions
Expert Solution
a)
b)
c)
As a potential investor you should buy Bond B
jeff jeffy answered 1 year agoRelated Solutions
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