Question
Pacific Healthcare has two different 25-year to maturity bonds. The first one is as follows: $100,000,000 face amount, 20.36% Annual Year to maturity rate, $126.25
Pacific Healthcare has two different 25-year to maturity bonds. The first one is as follows: $100,000,000 face amount, 20.36% Annual Year to maturity rate, $126.25 coupon payment, 10.35% current yield, $1218 expected price, 21.8% capital gain, and 34.42 total yield.
The second one is as follows: $64,000,000 face amount, 20.36% annual YTM, $750 coupon payment, 9.87% current yield, $750 expected price, -25% capital gain, and -17.62 total yield.
Of the two 25-year bonds, which bond would you prefer over the other and why? (if you are a tax-paying investor)
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