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The portfolio manager of Buy-Lo&Sell-Hi Company has excess cash that is to be invested for four years. He can purchase four year bonds of Groogle Company with 9 percent yield to maturity. Alternatively, he can purchase 20-year EyeBeeM Company bonds for $2.9 million that offer a par value of $3 million and an 11 percent coupon rate with annual payments. The manager expects that the required rate of return on these 20-year bonds will be 12 percent four years from now. What is the forecasted market value of the 20-year bonds in four years? Which investment is expected to provide a higher annual return over the four-year period? (show work and financial calculator inputs)

Financial Management, Finance

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