Solution-Indifferent between bond and another bond

Indifferent between bond and another bond

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Reference no: EM131355101

Suppose that John can buy a savings bond for $900 that matures in 3 years and pays John $1,000 with certainty. He is indifferent between this bond and another bond which is riskier but which pays 3% higher interest rate. How much, the riskier bond costs today if it pays $1,000 in 7 years.

$641
$784
$921
None of the above

Reference no: EM131355101

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Indifferent between bond and another bond : Suppose that John can buy a savings bond for $900 that matures in 3 years and pays John $1,000 with certainty. He is indifferent between this bond and another bond which is riskier but which pays 3% higher interest rate. How much, the riskier bond..

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Indifferent between bond and another bond

Reference no: EM131355101

Reference no: EM131355101

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