Which instrument will you prefer and why

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You can buy one bond today (Dec 31, 2016) issued by XYZ Inc with face value of $1000 and a coupon rate 8% payable quarterly and maturing on Dec 31, 2021. You want a Yield-toMaturity of 10 % and can buy this bond now for $880. You can also buy a share of this company today for $130, the company promises a dividend payment of $5 each quarter for next five years. Your educated guess is that the price will appreciate to $140 in five years and you want to use a discount rate of 10%. Which instrument will you prefer and why?

Reference no: EM131448921

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