Question
Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January
Your investment department has researched possible investments in corporate debt securities. Among the available investments are the following $100 million bond issues, each dated January 1, 2021. Prices were determined by underwriters at different times during the last few weeks. (FV of $1, PV of $1, FVA of $1, PVA of $1, EVAD of $1 and PVAD of $1) Company Bond Price Stated Rate 1. BB Corp. $106 million 14% 2. DD Corp. $100 million 13% 3. GG Corp. $86 million 12% Each of the bond issues matures on December 31,2040, and pays interest semiannually on June 30 and December 31 . For bonds of similar risk and maturity, the market yield at January 1,2021 , is 14%. Required: Other things being equal, which of the bond issues offers the most attractive investment opportunity if it can be purchased at the prices stated? The least attractive?
Most attractive Investment | |
Least attractive investment |
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