You have an obligation to pay $1,488 in four years and 2 months.In which bond would you invest your $1,000 to accumulate this amount,with relative certainty,even if the yield on the bond declines to 9.5% immediately after you purchase the bond?
A) a 6-year;10% coupon par value bond
B) a 5-year;10% coupon par value bond
C) a 5-year;zero-coupon bond
D) a 4-year;10% coupon par value bond
E) none of these

Question

Quizplus · Accepted Answer

The 5-year 10% coupon bond will provide enough interest and principal to meet the obligation, even if the yield declines to 9.5%.

You Have an Obligation to Pay $1,488 in Four Years