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26. Buckeye Industries has a bond issue with a face value if $1,100 that is coming...

26. Buckeye Industries has a bond issue with a face value if $1,100 that is coming due in one year. The value of Buckeye's assets is currently $1,200. Jim Tressell, the CEO, believes that the assets in the asset of the firm will be worth either $1,050 or $1,700 in a year. The going rate on one-year T-bills is 7%. What is the return on Buckeye's bonds?

a. 9.3%

b. 7%

c. 8.6%

d. 10.2%

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Answer #1

Answer :- Option a). 9.3 %

Explanation :- Return on bond = (1200 - 1100) / 1100

= 100 / 1100

= 0.09 i.e., 9 % (Most nearest to 9.3 % mentioned in option a).

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