Question
Please Solve this with complete explanation Consider the following investment choices. 1) You can buy a zero-coupon corporate bond issued by General Electric that matures
Please Solve this with complete explanation
Consider the following investment choices.
1) You can buy a zero-coupon corporate bond issued by General Electric that matures in one year. At maturity, you'll receive the par value of $1,000.
2) You can buy a Treasury Principal Strip (zero coupon Treasury bond) that matures in one year. At maturity, you'll receive the par value of $1,000.
3) You can buy a share of Google common stock, which doesn't pay a dividend, and you expect to be able to sell it for $1,000 in one year.
You believe that Google stock is riskier than the GE bond, which in turn is riskier than the Treasury bond. Which one would you expect to have the lowest market price today?
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