Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. junior just received his annual bonus and is looki

Junior just received his annual bonus and is looking to invest it in one of two...

80.2K

Verified Solution

Question

Finance

Junior just received his annual bonus and is looking to investit in one of two potential investments. Junior is considering a10-year 9% coupon bond issued by HomeCo that is currently sellingfor $1,024.51. His other option is to buy stock in Residential Inc.Residential just issued a $1.2 dividend and expects to grow at 4%.Residential’s current stock price is $42.30. If both investmentsare fairly priced and Junior intends to hold the investmentindefinitely, which offers a higher return?

The stock, 6.84% > 4.31%

The bond, 9.00% > 2.95%

The bond, 8.63% > 6.95%

The stock, 4.31% > 4.00%

Answer & Explanation Solved by verified expert
4.4 Ratings (972 Votes)
Calculating Return of bondNo of years to maturity 10 years Coupon rate 9 Parvalue 1000 Current selling price 102451Coupon payment Coupon rate x par value 9 x 1000 90We find    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Biology
1.2K views

In many assays the K65A RT mutant shows a reduction in RT activity. using the structure papers,...

Medical Sciences
1.2K views

13. Naya is a healthy 45 year old female, 5 foot 2 inches in height, and...

Statistics
1.2K views

In what ways do advertisers in magazines use sexual imagery to appeal to youth? One study...

General Management
1.2K views

The primary difference between demand management and demand forecasting is 1) forecasting is only possible when quantitative...

Basic Math
1.2K views

1 point Find a vector a that has the same direction as 10 5 10...

Basic Math
1.2K views

Find all critical values for f x The critical values occur at x commas 10x...

Basic Math
1.2K views

Question 6 of 15, Step 1 of 1Use the basic proportionP100=CorrectAto solve the following problem...

Basic Math
1.2K views

Provide an appropriate response.An event is considered unusual if the probability of observing the event...

Calculus
1.2K views

Without a calculator match each function with its graph y log x e ba y...

Algebra
1.2K views

5 points Solve for x x 4 x 2

Accounting
1.2K views

Pina Corporation reported net income, $79500; cash provided by operating activities, $121000; cash used by...

Accounting
1.2K views

June 18, 2014 a company borrows $20,000 from a bank with a one year term...