Question: Question B1 Part II At the present time, you expect a decline in interest rates and you have to choose between the following two bonds:

Question B1

Part II

At the present time, you expect a decline in interest rates and you have to choose between the following two bonds:

Bond A Bond B
Issuing Company MTR Corporation China Night Club Limited
Credit rating AA AA
Maturity 10.5 years 10.0 years
Yield to maturity 7% 10%
Call features Noncallable Deferred call starts from year 2 to 7 years

Required:

Which bond should be selected? Justify your answer. (6 marks)

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