Question
Douglas, an active investor, invested $1000 in a bond which promised a return of 3% per annum. Douglas expected to receive a total amount of
Douglas, an active investor, invested $1000 in a bond which promised a return of 3% per annum. Douglas expected to receive a total amount of $1030 at the end of the year by calculation. At the end of year 1, Douglas received $1030. Given that the Government Bonds provide a return of 2.5% pa, which of the following statement is true with respect to the bond Douglas invested in?
A. The instrument is riskless B. The instrument can be classified as one of medium risk C. The bond has a high risk, and can be classified in the junk-bond status D. None of the above
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started