Decide to invest in corporate bonds

Assignment Help Financial Management

Reference no: EM13976325

Suppose you decide to invest in corporate bonds. Accordingly, you visit a bond store. You see 3 bonds on the shelf. One is priced at $1,015.53, another is priced to sell at $1,300.00, and a third is selling at a discounted amount of $876.06. All have a $1,000.00 face value, and carry equal risk. From your reading, and from class lecture, you know that you will be earning the same rate on your investment, regardless of which bond(s) you purchase. But you have a friend with you, who doesn't understand how you can possibly earn the same interest rate, due to the difference in purchase price. How will you explain this concept to him or her?

Reference no: EM13976325

Questions Cloud

Does inflation influence a workers wage rate : Why would workers be more likely to accept a real wage cut that arises from increase in CPI than a nominal wage rate? Does inflation influence a workers wage rate?

Start saving for retirement : Your job pays you only once a year for all the work you did over the previous 12 months. Today, December 31, you just received your salary of $68,000 and you plan to spend all of it. However, you want to start saving for retirement beginning next yea..

What is the present value of the uneven cash flow stream : Assume that you are nearing graduation and have applied for a job with a local bank. What is the present value of the following uneven cash flow stream −$50, $100, $75, and $50 at the end of Years 0 through 3? The appropriate interest rate is 10%, co..

Research the meaning and history of par value : Research the meaning and history of "par value" as it pertains to common stock. Is this term still relevant to stockholders' equity today, or is it merely an anachronism, an unnecessary carryover from the past, much like an old TV antenna we're too l..

Decide to invest in corporate bonds : Suppose you decide to invest in corporate bonds. Accordingly, you visit a bond store. You see 3 bonds on the shelf. One is priced at $1,015.53, another is priced to sell at $1,300.00, and a third is selling at a discounted amount of $876.06. But you ..

What was the firms end-of-year cash balance : You have just been hired as a financial analyst for Basel Industries. Unfortunately, company headquarters (where all of the firm's records are kept) has been destroyed by fire. So, your first job will be to recreate the firm's cash flow statement for..

Any ethical considerations : Do you believe there are any ethical considerations in slowing payments to your suppliers for the sake of increasing your company's bank balances?

What is the business opportunity : Create an overview draft (350-500 words) that addresses the following: Describe briefly the context and your organization. Articulate the vision, mission, and strategy of your organization, business unit, or division. What are its sources of competit..

What are the ethical issues involved : Midwest health club (MHC) offers 1-year memberships. Membership fees are due in full at the beginning of the individual membership period. As an incentive to new customers, MHC advertidsed taht any customers not satisfied for any reason could receive..

User Account

All Pages