You wish to allocate funds to a bond with a long time until maturity. Assume you know
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- You wish to allocate funds to a bond with a long time until maturity. Assume you know that interest rates are going to stay constant over this period. All other things being equal, do you have a preference between a zero-coupon bond yielding 5.5% or a bond with annual coupon payments of 5%, selling at a yield to maturity of 5.5%? Assume that you are investing the same amount.
- Now assume that there is a significant chance that the interest rates will increase during the time you hold the bond. Explain if and how your answer to the previous question changes.
Related Book For
Fundamentals Of Human Resource Management
ISBN: 9781119032748
12th Edition
Authors: David A DeCenzo, Stephen P Robbins, Susan L Verhulst
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