Fred and ethel are both considering buying a corporate bond, Ask an Expert

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Fred and Ethel are both considering buying a corporate bond with a coupon rate of 8%, a face value of $1,000, and a maturity date of January 1, 2025. Which of the following statements is MOST correct?

a. Fred and Ethl will only buy the bonds if the bonds are rated BBB or above.

b. Because both Fred and Ethel will receive the same cash flows if the buy the a bond, they both must assign the same value to the bond.

c. If Fred decides to buy the bond, then Ethel will also decide to buy the bond if markets are efficient.

d. Fred may determine a different value for a bond than Ethel because each investor may have a different level of risk aversion, and hence a different required return.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91619521

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