Question
Ayesha has decided to invest her AED10,000 and is considering purchasing 10 bonds of the Starbucks Corporation. The bond has a par value of AED1,000
Ayesha has decided to invest her AED10,000 and is considering purchasing 10 bonds of the Starbucks Corporation. The bond has a par value of AED1,000 with 10 percent coupon rate and will mature in 10 years. Does Ayesha have enough money to buy 10 bonds if the required rate of return is 9 percent? No. Since the required rate of return (9%) is less than the bond's coupon rate (10%), the bond's price is greater than its par value ($1,000). Thus, the total price of 10 bonds is greater than $10,000. No. Since the maturity of the bond is 10 years after, the economic conditions might have been changed dramatically. Yes. Since the required rate of return (9%) is less than the bond's coupon rate (10%), the bond's price is greater than its par value ($1,000). Thus, the total price of 10 bonds is greater than $10,000. It is not possible to know.
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