Question

high interest rates and selling at steep discounts (junk bond). The bonds are rated as equally risky
and both mature in 15 years.
Bond Stated Value Annual Interest
Payment
Current Market Price
with Commission
GenDev $1000 $67 $480
RJR $1000 $98 $630
a) Construct a choice table for interest rates from 0 to 100%
b) Which, if any, of the bonds should you buy if your MARR is 20%
c) Are there professional ethics standards for stock brokers in the U.S.? What are some common
ethical pitfalls.

Answer 1

Solution : A sboek broken has proposed two investments in low rated . cexponate bonds paying high interest rates and selling at Sleep discounts 1. Actually the bords are rated as equally susky and both mature in 15 years. Band Annual Interest payment Stated value current market Price with commission Gen Dev 1000 67 4480 16-0% RJR 1000 98 630 [ 16.6% Bond > Gen Dev → RJR - RATE (16,67-480,1000) - BATE (15,48,-630,1000) = PV (Rate, 15.67,1000) = PV (Rate , 15, 98, 1000)

@ Construcking a choice Jable får interest rates from 01. to loo/.. Price Průce of RJR of Giren Dev $2,005.00 07. $ 2,470.00 5.1. $1,176.45 $ 1,498.22 10% $749.00 $984.79. 157 207 25.1. 304 354 LO 454 $514-007 $318 - 16 $ 293 75 $ 238 .51 $ 200.40 $172 · 85 $ 152 - 12 $135-98 $ 123.04 $ 112.44 $ 103.57 $96-03 $89-54 $ 83-89 $ 78.91 $ 74.51 55-1 $ 695-79 $ 523:10 $ 413:39 $ 339.82 $ 287.99 $ 249.85 $ 220.75 $ 197.84 $ 179.33 $164.06 $ 131:23 $ 140-30 $ 130-86 $ 122.63 $ 115.38 $_108.95 60% 654 Joy 757 801 85% 90% 954 $70.57 $ 103.20 100% $ 6703 $98.03

- - If any of the bonds should you buy if your MARR in Box Since the YTM for both the trend å less than MARR, he shouldn't wchoose to invest in any bond. © Yes, there is propowional ethics standard för slock borokers. Hence following are the some common ethical pitfallo. © considering that one size fits all ® There is no propen information channel for the clients. . it provides higher leverage ® moritosing and control is weak.