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A bond investor is analyzing the following annual coupon bonds; Issuing Company Annual Coupon Rate Irwin, LLC 5% Johnson Corporation 12% Smith Incorporated 9%
A bond investor is analyzing the following annual coupon bonds; Issuing Company Annual Coupon Rate Irwin, LLC 5% Johnson Corporation 12% Smith Incorporated 9% Each bond has 10 years until maturity and the same level of risk. Their yield to maturity (YTM) is 9%. Interest rates are assumed to remain constant over the next 10 years. BOND VALUE [S] 1200 1100 B 1000 900 800 700 A C 600 10 8 6 4 2 YEARS TO MATURITY 0 Using the previous information, correctly match each curve on the graph to it's corresponding issuing company. (Hint: Each curve indicates the path that each bond's price, or value, is expected to follow.) Curve A Curve B Curve C Based on the preceding information, which of the following statements are true? Check all that apply. The expected capital gains yield for Irwin, LLC's bonds is positive. All of the bonds will have the same value when they reach maturity. Johnson Corporation's bonds are a better investment than Irwin, LLC's bonds. Smith Incorporated's bonds are a better investment than Johnson Corporation's bonds. Smith Incorporated's bonds have exhibited a substantial trading volume in the past few years. Its bonds would be referred to as a
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