Silhouette Enterprises must make a balloon loan payment of $1000000 in 3 years. The firm’s treasurer wants to purchase a bond that will provide funds for repayment and minimize reinvestment risk. Assume the company has the following four investment options (all with face values of $1000000). Market rates are at 8.00 percent. All bonds are non-callable and are otherwise similar except as noted. Which option best meets the treasurer’s requirements()
A. A 4-year, zero coupon bond priced to yield 8.50%.
B. A 3-year, 8.00% semi-annual coupon bond priced at par.
C. A 3-year, zero coupon bond priced to yield 8.00%.