What is the current market price of ABC 30-year bonds, with 10 years remaining to maturity? These bonds were issued with a $1,000 par value, and pay quarterly coupons at a rate of 5.6% p.a. Market yields are currently 4.5% p.a.

Should Yousef purchase a $100,000 seven-year corporate bond paying coupons at a rate of 6% p.a., for a market price of $80,000? His required rate of return is 9% p.a. Demonstrate and explain why/ why not.

Answer rating: 100% (QA)

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