Investing corporate - Financial Economics by ClassOf1

VIEWS: 27 PAGES: 1

Investing in corporate bonds - For how much money will Mark be able to sell each of his bonds? Explain your answer : After doing some research on the internet,Mark is considering investing his life savings in corporate bonds.

More Info
									              Sub: Economics                                                              Topic:Financial Economics



              Question:
              Investing in corporate bonds - For how much money will Mark be able to
              sell each of his bonds? Explain your answer.

         ClassOf1 provides expert guidance to College, Graduate, and High school students on homework and assignment problems in
                       Math, Sciences, Finance, Marketing, Statistics, Economics, Engineering, and many other subjects.


              After doing some research on the Internet, Mark is considering investing his life savings in
              corporate bonds. He's not really sure what they are, however, and wants you to explain them
              to him
              In 2048, Mark decides he wants to sell his ACME bonds. In 44 years, ACME has never missed a
              coupon payment. The final two coupon payments are still to be paid. Interest rates on
              comparable bonds are currently at 5%. For how much money will Mark be able to sell each of
              his bonds? Explain your answer.

              Solution:
              Since the comparable bonds are 5% and the interest rate are also the same
              So rule of thumb describe that if interest rate is more than the market rate then we would sell
              the bond in discount and vice versa, if the market rate is equal to the coupon rate the bond will
              have the par value only, Mark would not make any profit out of these bonds.


                                                          ** End of the Solution **


         ClassOf1 provides expert guidance to College, Graduate, and High school students on homework and assignment problems in
                       Math, Sciences, Finance, Marketing, Statistics, Economics, Engineering, and many other subjects.




                                                                www.classof1.com


*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same in
                                                      lieu of your academic submissions for grades.
missions for grades.

								
To top