Reference no: EM13784405

You have been interviewed for an investment consultant position. The hiring decision depends on your recommendation on the following problem that a client has brought to the firm. The client, Mr. Majors, wants to invest in bonds. He must choose between the following, both of which are selling at 118.90. Bond A: 12 percent coupon bond with 5 years to maturity, interest paid semiannually Bond B: 14 percent coupon bond with 6 years to maturity, interest paid semiannually Mr. Major's goal is to earn a 7.4 percent on his investment annually so that at the end of the 4 years he will have accumulated $1,590.00 for each bond he buys. Earning that amount or better is crucial because he must repay a large loan with the proceeds at the end of his 4 year investment horizon. He will sell the bonds at that time. Which of the two bonds is better for Mr. Major?