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Bonds - which would you purchase?

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Given the opportunity to invest in one of the three bonds listed below, which would you purchase? Assume an interest rate of 7%.

Bond Face Value Annual Coupon Rate Maturity Price
A $1000 4% 1 year $990
B $1000 7.5% 17 years $990
C $1000 8.5% 25 years $990

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Solution Summary

This solution discusses how to choose a bond to purchase.

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We should compute and compare the return rate of each bond:

A. FV = 1000
Payment = 1000*4% = 40
N = 1
PV = ...

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