Discuss four (4) advantages and four (4) disadvantages accruing to a company that is traded in the public securities markets.
Garland Corporation has a bond outstanding with a $90 annual interest payment, a market price of $820, and a maturity date in five years. Find the following:
The coupon rate
The current rate
The approximate yield to maturity
An investor must choose between two bonds: Bond A pays $92 annual interest, has a market value of $875, and has 10 years to maturity. Bond B pays $82 annual interest, has a market value of $900, and has two years to maturity.
Compute the current yield on both bonds.Based on your computations above, which bond should the investor select?
A drawback on the current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.30%. What is the approximate yield to maturity on Bond B?
Has your answer changed between parts “b” and “c” of this question in terms of which bond to select?