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
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
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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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