5
QuizMultiple Choice

Stocks and Bonds

Question 5 • LVA - Mathematical Modeling - Spring

Your current CD matures in a few days. You would like to find an investment with a higher rate of return than the CD. Stocks historically have a rate of return between 10% and 12%, but you do not like the risk involved. You have been looking at bond listings in the newspaper. A friend wants you to look at the following corporate bonds as a possible investment. What price would you pay for each bond if you purchased one of them today? (Remember the face value is $1000.)

Question illustration
Answer
A
ABC: $1047.50 XYZ: $1005.00
B
ABC: $1104.75 XYZ: $1100.50
C
ABC: $872 XYZ: $983
D
ABC: $750 XYZ: $840
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