(Answered) You can buy one bond today dec 31 2016 issued by xyz inc

Accounting

You can buy one bond today (Dec 31, 2016) issued by XYZ Inc with face value of $1000 and a coupon rate 8% payable quarterly and maturing on Dec 31, 2021. You want a Yield-to- Maturity of 10% and can buy this bond now for $880. You can also buy a share of this company today for $130, the company promises a dividend payment of $5 each quarter for next five years. Your educated guess is that the price will appreciate to $140 in five years and you want to use a discount rate of 10%. Which instrument will you prefer and why?

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