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Fashion Trends PH is seeking to borrow money to finance the development of its online retailing business using private bonds. These pay no interest during their life but a larger sum on maturity than was originally borrowed. It is offering investors a return of 100,000 after 15 years for every 40,000 loaned. An appropriate risk-adjusted interest rate is 6 percent. Is this a good deal for investors? Explain your answer

Fashion Trends PH is seeking to borrow money to finance the development of its online retailing business using private bonds. These pay no interest during their life but a larger sum on maturity than was originally borrowed. It is offering investors a return of 100,000 after 15 years for every 40,000 loaned. An appropriate risk-adjusted interest rate is 6 percent. Is this a good deal for investors? Explain your answer

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Fashion Trends PH is seeking to borrow money to finance the development of its online retailing business using private bonds. These pay no interest during their life but a larger sum on maturity than was originally borrowed. It is offering investors a return of 100,000 after 15 years for every 40,000 loaned. An appropriate risk-adjusted interest rate is 6 percent. Is this a good deal for investors? Explain your answer
Transcribed Image Text:Fashion Trends PH is seeking to borrow money to finance the development of its online retailing business using private bonds. These pay no interest during their life but a larger sum on maturity than was originally borrowed. It is offering investors a return of 100,000 after 15 years for every 40,000 loaned. An appropriate risk-adjusted interest rate is 6 percent. Is this a good deal for investors? Explain your answer
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