Knowing that interest rate risk is highest for very long term bonds some well known corporations including Coca-Cola, Ford Motor Company, IBM and Disney have issued 100 year bonds.
1. Explain why these companies would issue 100 year bonds? what are the advantages and disadvantages of issuing 100 year bonds as compared to bonds which have a much shorter maturity date?
2. Why would investors purchase bonds with 100 year maturities knowing that they are unlikely to still be living when the bonds pays back its principal? what type of investors would be most interested in this type of bond?