Sonia Russo and Anthony Myers are Vice Presidents of Universal Capital Management (UCM) and co-directors of the

Question:

Sonia Russo and Anthony Myers are Vice Presidents of Universal Capital Management (UCM) and co-directors of the company's pension fund management division. Russo has responsibility for fixed income securities (primarily bonds), and Myers is responsible for alternative investments (mainly real estate). A major new client, the Westchester County Union (WCU), has requested that UCM present an investment seminar to the representatives of the participating members, and Russo and Myers, who will make the actual presentation, have asked you to help them by answering questions on one specific transactions they wish to advise on: A bond investment. Considering the typical average investment horizon of the WCU portfolio, Sonia Russo has identified a bond, an additional investment which she would like to recommend. The bond in question has a 10-year maturity with a 9 percent coupon rate of interest and a face value of $1,000. Coupons are paid annually. Russo believes that given the current market and business conditions, the bond's required rate of return is 10 percent.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...