Your current CD matures in a few days. You would like to find an investment with a higher rate of return than the CD. Stocks
historically have a rate of return between 10% and 12%, but you do not like the risk involved. You have been looking at bond
listings in the newspaper. A friend wants you to look at the following corporate bonds as a possible investment.
Net. Chg.
Bond
ABC 7-15
Cur. Yld. Vol Close
75 1281003
- 8.4
17
XYZ 7-15
100-
What price would you pay for each bond if you purchased one of them today? (Remember the face value is $1000.)
a. ABC: $1047.50
XYZ: $1005.00
b. ABC: $1104.75
XYZ: $1100.50
C. ABC: $872
XYZ: 5983
AR
70