Danno is trying to decide which of two bonds to buy. Bond H is a 10 percent coupon, 10-year maturity, $1,000 par, January 1, 2000 issue paying annual interest. Bond F is a 10 percent coupon, 10-year maturity, $1,000 par, January 1, 2000 issue paying semiannual interest. The market required return for each bond is 10 percent. When using present value to determine the prices of the bonds, Danno will find that ________.

Question

Quizplus · Accepted Answer

The difference in the payment frequency does not affect the present value of the bonds since the market required return is the same for both. Therefore, the price of Bond H and Bond F should be the same.

Danno Is Trying to Decide Which of Two Bonds to Buy