Hello,

PLease evaluate the strategic advantages cited by the paragraph below and whether you agree. also in include references

If I were to invest in one of the bonds listed, I would choose the Apple Inc. 2.65% bond maturing in 2050. While some bonds in the table offer higher yields, such as Skillz Inc. at 17.78%, they come with significant credit risk as reflected by their low Caa3/CCC ratings. Apple's bond, on the other hand, is rated Aaa/AA+, which is among the highest possible credit ratings. This reflects Apple's strong financial stability and very low risk of default. Although the coupon rate is decent, the security and reliability of Apple make it an attractive long-term investment for a conservative investor seeking steady returns (Preston Pysh. (2012).

For this bond, the annual coupon payment would be $26.50, calculated as 2.65% of the $1,000 par value. However, the bond is currently trading at a discount, with a last sale price of $670.02. This means investors pay less than par but still receive the fixed $26.50 per year plus the $1,000 principal at maturity. The last sale yield of 4.895% reflects the effective annualized return an investor would earn if the bond is held until maturity, considering both coupon income and capital gains from buying the bond below par. This distinction between the coupon rate and the yield to maturity is crucial when assessing fixed-income investments (Parrino, Kidwell, & Bates, 2021).

While Apple's bond is highly safe, other factors should be considered before investing. Interest rate risk is significant for long-term bonds, as rising rates could reduce the market value of the bond. Investors should also account for inflation risk, since fixed coupon payments may lose purchasing power over decades. Callable features in other bonds, liquidity in the bond market, and diversification across industries are also important. Overall, this unit has reinforced the importance of evaluating bonds using multiple factors, such as credit ratings, yields, prices, and risks, rather than just coupon rates. In both workplace and personal finance decisions, understanding these dynamics helps make better investment choices by balancing risk and return

References

Vipond, T. (n.d.) Bond Pricing https://corporatefinanceinstitute.com/resources/fixed-income/bond-pricing/

Parrino, R., Kidwell, D. S., & Bates, T. (2021). Fundamentals of corporate finance (5th ed.). Wiley.

Preston Pysh. (2012, April 24). 7.What are the components of a bond[Video]. YouTube. https://www.youtube.com/watch?v=KQ2bfwHMrnM