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Uber and Lyft have similar $1,000 face value bond issues outstanding. The bonds are equally risky. The Uber bond has a coupon rate of 8%
Uber and Lyft have similar $1,000 face value bond issues outstanding. The bonds are equally risky. The Uber bond has a coupon rate of 8% paid annually and matures 20 years from today. The Lyft bond has a coupon rate of 8% paid semiannually, and it also matures in 20 years. If the rate of return, rd, is 12 percent, semiannual basis, for both bonds, what is the difference in current market prices of the two bonds?
a. | No difference. | |
b. | $2.20 | |
c. | $6.28 | |
d. | $17.53 | |
e. | $3.77 |
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