Question
You are planning to invest $10,000 in ABC's bonds. Right now the stated rate of the bonds is seven percent, and the market rate is
You are planning to invest $10,000 in ABC's bonds. Right now the stated rate of the bonds is seven percent, and the market rate is eight percent. The Federal Reserve System (FRS) is considering lowering the interest rate by two percent to help stimulate the economy sometime next year, but the final decision has not been made (or at least publicly announced). Should you invest in the bonds now or wait until the FRS makes its announcement? What is your reasoning behind your decision? What effect will this have on ABC's financial statements? How long should you hold the bonds if you choose to invest?
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