Question 8
10 pts
Brent wants to buy one of two potential securities. The first is a StandUp bond with 14-year maturity and 7% coupon that has a current price of $825.12. The second option is to buy stock in RunDry. RunDry just issued a $2.50 dividend and expects to grow at 3.0%. The current stock price for RunDry is $26.75. If both investments are fairly priced and he plans to hold the investment indefinitely, which offers Brent a higher return?
The StandUp bond, 9.63% > 7.00%
The StandUp bond, 7.00% > 4.63%
The RunDry stock, 12.35% > 4.63%
The RunDry stock, 12.63% > 9.25%