41. You have invested in a business that proudly reports that it is profitable. Your investment of $5000 has produced a profit of $300. The managers think that if you leave your $5000 invested with them, they should be able to generate $300 per year in profits for you in perpetuity. Evaluating other investment opportunities, you note that other long-term investments of similar risk offer an expected return of 8%. Should you remain invested in this firm?

• Understand bond terminology • Compute the price and yield to maturity of a zerocoupon bond • Compute the price and yield to maturity of a coupon bond

• Analyze why bond prices change over time • Know how credit risk affects the expected return from holding a corporate bond