Two investors are considering the purchase of Corporation LMQ bonds. The bonds are selling at their par value of$1,000 with a coupon rate of 9%. Investor A decides to buy the bonds and investor B does not buy the bonds. Why?
a. The yield to maturity for investor A must be higher than the yield to maturity for investor B.
b. Investor A must have a required return less than or equal to 9%.
c. Investor A must have a required return higher than the bonds yield to maturity.
d. Investor B must have required return lower than the bonds yield to maturity.
Two investors are considering the purchase of Corporation LMQ bonds. The bonds are selling at their par value of$1,000 with a coupon rate of 9%. Investor A decides to buy the bonds and investor B does not buy the bonds. Why?
a. The yield to maturity for investor A must be higher than the yield to maturity for investor B.
b. Investor A must have a required return less than or equal to 9%.
c. Investor A must have a required return higher than the bonds yield to maturity.
d. Investor B must have required return lower than the bonds yield to maturity.
Related questions
Part A
An investor just purchased a 10-year, $1,000 par value bond. The coupon rate on this bond is 8 percent annually, with interest being paid every 6 months. If the investor expects to earn a 10 percent simple rate of return on this bond, how much should she pay for it? (Round the answer to two decimal places.)
Part B
Assume that an investor wishes to purchase a 20-year bond with a maturity value of $1,000 and semiannual interest payments of $40. If the investor requires a 10 percent simple yield to maturity on this investment, what is the maximum price she should be willing to pay for the bond? (Round the answer to the nearest whole number.)
A 619
B 902
C 828
D 674
Tony's Pizzeria plans to issue bonds with a par value of $1,000 and 10 years to maturity. These bonds will pay $45 interest every 6 months. Current market conditions are such that the bonds will be sold at net $937.79. What is the yield to maturity (YTM) of the issue as a broker would quote it to an investor? (Round the answer to the nearest whole number.)
| 9% | ||
| 10% | ||
| 11% | ||
| 7% |
The last dividend on Spirex Corporation's common stock was $4.00, and the expected growth rate is 10 percent. If you require a rate of return of 20 percent, what is the highest price you should be willing to pay for this stock?
| $44.00 | ||
| $38.50 | ||
| $50.00 | ||
| $45.69 |
