Bunny bond with yield to maturity

Assignment Help Financial Management

Reference no: EM131013287

Susan has a 5-year “bunny bond” with a yield to maturity of 6.4% that will be automatically reinvested next month. She is considering liquidating the bond and reinvesting in a 10-year 3.5% coupon bond with a yield to maturity of 6.5%. Market rates are very unstable and are just as likely to rise or fall over Susan’s 5 year time horizon. The best action for Susan is to

A: Invest in the 10-year bond since the yield is higher

B: Invest in the 10-year bond because it has greater maturity

C: Invest in the 10-year bond since the coupons can be reinvested

D: Reinvest in the “bunny bond” to avoid lost of accrued interest

E: Reinvest in the “bunny bond” to lock-in the yield

Reference no: EM131013287

Questions Cloud

Retail margins on the product : Horatio Alger has just become product manager for Brand X. Brand X is a consumer product with a retail price of $1.00. Retail margins on the product are 33%, while wholesalers take a 12% margin. Brand X and its direct competitors sell a total of 20 m..

How effectiveness of control mechanism is dependent on each : Describe the role that each of the ‘elements of control' must play and how the effectiveness of control mechanism is dependent on each

Do a swot analysis of the nokia-microsoft strategic alliance : Within today's changing global software and mobile phone industries, evaluate and assess Nokia's and Microsoft's product lines and market shares. What did you learn from the Nokia-Microsoft case when applying the main theories and top- ics from thi..

High price multiples : High price multiples:

Bunny bond with yield to maturity : Susan has a 5-year “bunny bond” with a yield to maturity of 6.4% that will be automatically reinvested next month. She is considering liquidating the bond and reinvesting in a 10-year 3.5% coupon bond with a yield to maturity of 6.5%. Market rates ar..

Treasury note with annual coupon rate : Consider a 2-year Treasury note with annual coupon rate 4% and the coupons are paid semiannually. The continuously compounded bond yield is 2% per year. What is the bond price?

Present an initial project report to the project sponsor : As the project manager of the centre website you are required to present an initial project report to the project sponsor that includes the following specific project outputs to show how you propose to implement this project

What are the shareholders earnings from the corporation : Consider a C corporation. The corporation earns $5 per share before taxes. After the corporation has paid its corresponding taxes, it will distribute 100% of its earnings to its shareholders as a dividend. What are the shareholder's earnings from the..

What kinds of conflicts are experienced : Do some research on monitoring and reporting issues facing an MNC with subsidiaries in (1) a country in Asia, and (2) a country in South America. Discuss problem areas and your recommendations to the MNC management as to how to control potential p..

User Account

All Pages