A hospital systems bonds have four years remaining to maturity a coupon interest

Question

A hospital systems bonds have four years remaining to maturity a coupon interest rate of 9% and a par value of $1,000. Suppose that your required rate of return is 12%. Would you be willing to buy this bond of the purchase price is $900? Explain why or why not? A hospital systems bonds have four years remaining to maturity a coupon interest rate of 9% and a par value of $1,000. Suppose that your required rate of return is 12%. Would you be willing to buy this bond of the purchase price is $900? Explain why or why not?

Explanation / Answer

Well, based on the calculations and basic understanding of the above given information, I would not prefer to buy these bonds. This is due to the fact that rate of return which I require is 12% and these bonds are giving just 9%, which is way too less according to my expectations. So, even if the purchase price of the bond is slashed to $900, my decision will remain the same, that is not to buy these bonds.

So, my answer is No, in this regard.

Regards.

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