The bond in question has a 10-year maturity with a 9 percent coupon rate of interest and a face value of $1,000. Coupons are paid annually. Russo believes that given the current market and business conditions, the bond’s required rate of return is 10 percent.

Sonia Russo and Anthony Myers are Vice Presidents of Universal Capital Management (UCM) and co-directors of the company’s pension fund management division. Russo has responsibility for fixed income securities (primarily bonds), and Myers is responsible for alternative investments (mainly real estate). A major new client, the Westchester County Union (WCU), has requested that UCM present an investment seminar to the representatives of the participating members, and Russo and Myers, who will make the actual presentation, have asked you to help them by answering questions on one specific transactions they wish to advise on: A bond investment. Considering the typical average investment horizon of the WCU portfolio, Sonia Russo has identified a bond, an additional investment which she would like to recommend. The bond in question has a 10-year maturity with a 9 percent coupon rate of interest and a face value of $1,000. Coupons are paid annually. Russo believes that given the current market and business conditions, the bond’s required rate of return is 10 percent.

[promo1]