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Two Multiple Choice Questions




Question;Suppose interest rates have been at historically high levels the past two years and you therefore expect they will soon go down. A reasonable strategy for bond investors during this time period would be to:1. invest only in stocks.2. invest in short-term bonds to reduce interest rate risk.3. buy only junk bonds which have higher interest rates.4. invest in long-term bonds to lock in earning the high interest rates.**********You buy an 8% annual coupon bond from CARRIS Inc. that has a 25 year maturity and a required return of 12%. The par value is $1,000. You sell the bond five years later when the required return is 10%. What is the ending value of the bond when it is sold (to the nearest dollar)?1) $8892) $9283) $1,0004) $830


Paper#48595 | Written in 18-Jul-2015

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