Considering buying corporate bond with coupon rate

Assignment Help Financial Management

Reference no: EM13948673

Fred and Ethel are both considering buying a corporate bond with a coupon rate of 8%, a face value of $1,000, and a maturity date of January 1, 2025. Which of the following statements is MOST correct?

a. Fred and Ethl will only buy the bonds if the bonds are rated BBB or above.

b. Because both Fred and Ethel will receive the same cash flows if the buy the a bond, they both must assign the same value to the bond.

c. If Fred decides to buy the bond, then Ethel will also decide to buy the bond if markets are efficient.

d. Fred may determine a different value for a bond than Ethel because each investor may have a different level of risk aversion, and hence a different required return.

Reference no: EM13948673

Questions Cloud

Show the order to names for a preorder traversal : If we deleted Eddie from the tree, what would the new tree look like (use one of the current names to replace Eddie and the tree redone)?

Concerning the after-tax return on the stocks : Which statement is true concerning the one-year after-tax return on the following stocks, assuming a 40% tax rate on dividends and a 20% tax rate on capital gains: Stock A is purchased for $50, offers a 5% dividend yield, and is sold for $56; stock B..

What is the weight for the equity-cost of equity : A firm has 2,000,000 shares of common stock outstanding with a market price of $3.00 per share and a book value of $2.25 per share. It has 3,000 bonds outstanding, quoted at 90 percent of par. The bonds mature in 15 years, have a coupon rate of 10% a..

Calculation of a binary tree : Write a function in C programming language that can find and return the cost of more expensive path from the root of a binary tree to a leaf.

Considering buying corporate bond with coupon rate : Fred and Ethel are both considering buying a corporate bond with a coupon rate of 8%, a face value of $1,000, and a maturity date of January 1, 2025. Which of the following statements is MOST correct? Fred and Ethl will only buy the bonds if the bond..

What is the operating profit earned by the four products : What is the operating profit earned by the four products for one quarter? Should the division process Product Delta further or sell it at split-off? What is the effect of the decision on quarterly operating profit?

What is expected return on equally weighted portfolio : What is the expected return on an equally weighted portfolio of these three stocks? What is the variance of a portfolio invested 18 percent each in A and B and 64 percent in C?

Laws passed to prevent against monopolies are called : Laws passed to prevent against monopolies are called

What is the operating cash flow for project : You are evaluating a project for your company. You estimate the sales price to be $270 per unit and sales volume to be 3,700 units in year 1; 4,700 units in year 2; and 3,200 units in year 3. The project has a three-year life. The tax rate is 40 perc..

User Account

All Pages