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Contact [7]
3 years ago
8

Builtrite has two bond issues outstanding(sold two separate groups of bonds over the years). One issue has a 7 year maturity and

the other issue had a 12 year maturity.Both bonds are paying 4.25% annual interest. Investors only require a 3.75% return, which of the following statements is true?
a) The 7 year bond issue is riskier than the 12 year bond issue
b) Both bond issues have the same amount of risk
c) The 7 year bond price will be selling closer to par value
d) The 12 year bond price will be selling closer to par value
Business
1 answer:
baherus [9]3 years ago
4 0

Answer:

C

Explanation:

Here, we want to select which of the given options in the question is true/correct.

From the question we can observe that the two bonds have required return less than coupon rate. Hence we can conclude that, both are premium bonds. The 7-years bond however. will have closer price to par value.

Bond prices will gradually decrease as we have a decrease in years to maturity. This means that the closer the year to maturity, the lesser the value of the bond price

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In a make-or-buy decision, a. the company must choose between expanding or dropping a product line. b. the company must choose b
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sergij07 [2.7K]
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C. Using software that helps with tracking progress.

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