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Which security would you choose

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(a) Suppose that you have some extra money to invest for one year. After a year you will need to sell your investment to pay tuition. After watching Bursa Malaysia you decide that you want to buy Avillion Bhd. stock. You call your broker and find that Avillion is currently selling for RM50 per share and pays RM0.16 per year in dividends. The analyst on Bursa Malaysia predicts that the stock will be selling for RM60 in one year. Should you buy this stock?

(b) How does a banker's acceptance (BA) help create more international trade?

(c) Suppose that the interest rate on a taxable corporate bond is 9% and that the marginal tax is 28%. Suppose a tax-free municipal bond with a rate of 6.75% was available. Which security would you choose?

Reference no: EM132829561

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