You are a personal financial planner working with a married couple in their early 40s who have

Question:

You are a personal financial planner working with a married couple in their early 40s who have decided to invest $100,000 in corporate bonds. You have found two bonds that you think will interest your clients. One is a zero bond issued by PepsiCo with an effective interest rate of 9 percent and a date of 2020. It is callable at par. The other is a Walt Disney bond that matures in 2093. It has an effective interest rate of 9.5 percent and is callable at 105 percent of par. Which bond would you recommend and why? Would your answer be different if you expected interest rates to fall significantly over the next few years? Would you prefer a different bond if the couple were in their late 60s and retired?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...