As a Chief Financial Officer (CFO) of IU South Bend, you realized that IUSB had idle (or surplus) cash at the end of last fiscal year, December 31, 2023. The cash will not be needed for the operation this year. Therefore, you are planning to invest the cash in short-term cash investment this year. There are three different bonds issued by each local government near here. All three bond issuers are financially healthy (e.g., no default risk) and information on each bond is as follows:

Question 1. Calculate current yields of each bond (Show how you calculate them).

 

Question 2. Which bond do you want to purchase for short-term cash investment? 

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A bond (issued by City of South Bend) B bond (issued by City of Mishawaka) C bond (issued by City of Elhart) Face value of bond ($) Annual coupon rate (%) 1,000 2,000 3,000 324 Price of bond ($) 950 1200 3700 A bond (issued by City of South Bend) B bond (issued by City of Mishawaka) C bond (issued by City of Elhart) Face value of bond ($) Annual coupon rate (%) 1,000 2,000 3,000 324 Price of bond ($) 950 1200 3700