You are interested in buying one corporate bond and your broker has offered two corporate bonds...

 

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You are interested in buying one corporate bond and your broker has offered two corporate bonds for you to consider: 1. Bond A: paying half-yearly coupons, with a maturity date of 1 June 2035, an annual coupon rate of 12% and a bond flat price of $110.00 2. Bond B: paying quarterly coupons, with a maturity date of 1 June 2045, an annual coupon rate of 8% and a bond flat price of $60.00 If the settlement date of both bonds is 1 June 2021, which of these bonds represents the best investment opportunity? You are interested in buying one corporate bond and your broker has offered two corporate bonds for you to consider: 1. Bond A: paying half-yearly coupons, with a maturity date of 1 June 2035, an annual coupon rate of 12% and a bond flat price of $110.00 2. Bond B: paying quarterly coupons, with a maturity date of 1 June 2045, an annual coupon rate of 8% and a bond flat price of $60.00 If the settlement date of both bonds is 1 June 2021, which of these bonds represents the best investment opportunity?

Answer rating: 100% (QA)

To determine which bond represents the best investment opportunity we need to calculate the yield to maturity YTM for both bonds and compare them The ... View the full answer