A zero coupon bond is selling for $476. The bond has a face value of $1,000 and matures in 8 years. Your friend
asks you if he should buy the bond. He tells you his required return is 9 percent.
Would you recommend he buy
the bond or not? Explain your answer.
The yield to maturity on the zero coupon bond is ($1,000/$476)1/8 - 1 = 9.7%. Therefore, your friend should buy the
bond.
You might also like to view...
Amanda was a tough manager and made it a regular practice to check up on her staff, looking for cheating on timesheets and people coming back late from lunch. Her employees were often dissatisfied with Amanda since she was a(n) ________ manager.
A. operations B. Theory X C. soldiering D. Hawthorne E. administrative
The measure of activity that allows for routine variations in manufacturing activity is:
a. theoretical capacity b. practical capacity c. normal capacity d. expected capacity
Videoconferencing and Web conferencing are inappropriate for problem-solving when participants have no bond
Indicate whether the statement is true or false
Decision variables for the transportation model can be defined as the amount of units to be transported from a given source to a given destination during the planning period
a. True b. False