Directions: Be sure to make an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English spelling and grammar. Sources must be cited in APA format. Your response should be a minimum of one (1) single-spaced page to a maximum of two (2) pages in length; refer to the "Assignment Format" page for specific format requirements.
NOTE: Show all work in arriving at the solutions requested.
1. Discuss four (4) advantages and four (4) disadvantages accruing to a company that is traded in the public securities markets.
2. Garland Corporation has a bond outstanding with a $90 annual interest payment, a market price of $820, and a maturity date in five years. Find the following:
a. The coupon rate
b. The current rate
c. The approximate yield to maturity
3. An investor must choose between two bonds: Bond A pays $92 annual interest, has a market value of $875, and has 10 years to maturity. Bond B pays $82 annual interest, has a market value of $900, and has two years to maturity.
a. Compute the current yield on both bonds.
b. Based on your computations above, which bond should the investor select?
c. A drawback on the current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.30%. What is the approximate yield to maturity on Bond B?
d. Has your answer changed between parts “b” and “c” of this question in terms of which bond to select? Explain.