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Question:

Fred and Ethel are both considering buying a corporate bond

by | Aug 1, 2022 | Recent Orders

Fred and Ethel are both considering buying a corporate bond with a couponrate of 8%, a facevalue of $1,000, and a maturity date of January 1, 2025. Which of thefollowing statements isMOST correct?a. Fred and Ethel will only buy the bonds if the bonds are rated BBB orabove.b. Because both Fred and Ethel will receive the same cash flows if they eachbuy a bond,they both must assign the same value to the bond.c. If Fred decides to buy the bond, then Ethel will also decide to buy thebond if markets areefficient.d. Fred may determine a different value for a bond than Ethel because eachinvestor mayhave a different level of risk aversion, and hence a different requiredreturn.please give a reason for you answer.

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