Question: *If the market price of the Treasury bonds is currently at $1100 per unit, whereas the stock of XYZ is trading at $10 per share, which investment should Company A sell to raise the necessary funds? Explain the reasons behind your decision*

Case Study:

Company A must liquidate some investments due to tightened borrowing requirements. The company own two types of investments which can be sold: (i) Treasury bonds with $1,000 face value, 10 years to maturity, annual coupons of $50 and yield to maturity of 4% per year, and (ii) ordinary shares of another company, XYZ, which just paid a dividend of $0.50 per share, with dividend growth prospects of 5% per year and required rate of return of 10%.