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Why an investor should choose to purchase bonds

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Reference no: EM132753477

The ARA Corporation bonds have a coupon of 14%, pay interest semiannually, and they will mature in 7 years. Your required rate of return for such an investment is 10% annually.

Required:

(a) How much should an investor pay for a $1,000 ARA Corporation bond?

(b) Discuss reasons why an investor should choose to purchase bonds over stocks given his risk profile.

Reference no: EM132753477

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