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      Question

      In which of the following cases should an investor buy a

      bond?
      A Intrinsic Value < Market Value Correct Answer Incorrect Answer
      B Intrinsic Value > Market Value Correct Answer Incorrect Answer
      C Intrinsic value < redemption value Correct Answer Incorrect Answer
      D Market Value< Redemption Value Correct Answer Incorrect Answer
      E Market Value > Redemption Value Correct Answer Incorrect Answer

      Solution

      When the intrinsic or calculated value of a bond is more than its market value, it means the bond is undervalued by the market and hence an investor should buy it as the market value will increase to reflect the intrinsic value over time and lead to gains to the investor.

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