A $1,000 par corporate bond with a coupon of 5% that pays interest semiannually is currently selling for $1,040. The current rate of return or current yield on this bond is

A: 2.4% B: 2.5% C: 4.0% D: 4.8% E: 5.0%

Each of the following four corporate bonds is currently selling at a discount:

Bond Yield to Bond Coupon Maturity Rating Maturity A 5.2% 5 years AA 6.0% B 5.2% 10 years B 7.0% C 5.0% 15 years AA 6.0% D 4.8% 5 years AAA 5.8%

Jill is considering investing in corporate bonds, but she is concerned about maintaining her principal over her 5-year time horizon. She anticipates market interest rates to increase over the next several years. The best choice for Jill is to invest in

A: Bond A B: Bond B C: Bond C D: Bond D E: Either Bond A or Bond

Linda lives in New York City and pays 8% in local and state taxes and 30% in Federal income taxes. Her time horizon is about four years, and Linda is concerned with maximizing her return. Linda is considering the following bond investments that each have similar ratings and commissions:

Bond Type     Yield A NY State    5.3% B Virginia State Bond   5.6% C Corporate Bond   8.2%

Based on the above information, Linda’s best choice is

A: Bond A B: Bond B C: Bond C D: Either Bond A or Bond B since they are both municipals E: Linda’s time horizon is too long to be investing in bonds