Question
Evaluate which of the following options would be your best investment based solely on the yield to maturity criterion. Option #1: Purchase a $10,000 discount
Evaluate which of the following options would be your best investment based solely on the yield to maturity criterion.
Option #1: Purchase a $10,000 discount bond selling for $8,100 and maturing in 4 years.
Option #2: Purchase a $10,000 coupon bond with a 5.5% coupon rate selling for $10,600 and maturing in 6 years.
Option #3: Lend a reliable friend $15,000 with the agreement that she pays you $6,534.80 five years from now, $8,540.72 ten years from now, and $11,162.38 fifteen years from now. (Note: each future payment represents an equal present value amount).
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