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    Question

    An investor should buy a bond

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

    Solution

    An investor should buy a bond when the intrinsic value of the bond is greater than its market value. The intrinsic value of a bond represents its true worth or fair value based on factors such as the bond's cash flows, interest rates, credit quality, and other relevant market conditions. If the intrinsic value of a bond is higher than its current market value, it suggests that the bond is undervalued and has the potential to provide a favorable return on investment. By purchasing the bond at a price lower than its intrinsic value, the investor can benefit from capital appreciation and potential income through coupon payments.

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