Homework Answers
The answer is option d- bond price decrease
In summary, the price or present value of an existing bond moves in the opposite direction of market interest rate changes: bond prices will rise when interest rates fall, and bond prices will fall when interest rates rise.
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Interest rates typically rise when the maturity date on existing bonds extends farther into the future....
The Fed controls interest rates to either tighten or loosen the economy. When the Feds are...
The Fed controls interest rates to either tighten or loosen the economy. When the Feds are needing to tighten the economy, they will raise the interest rates. When interest rates are changed, it sends a ripple effect through the entire financial market. When interest rates rise, cost of capital and borrowing increase. Consumers will borrow and spend less. This will lead to a slower economy and help to hedge inflation. However, the change in interest rates can affect the market...
9) Taussig Corp's bonds currently sell for $1.150. They have a 6.75% annual coupon rate 15-year...
9) Taussig Corp's bonds currently sell for $1.150. They have a 6.75% annual coupon rate 15-year maturity, they have been called in 6 years at $1.067.50. Under these conditions, whe rate of return should an investor expect to earn. Original par value is $1000. 10) Consider a coupon bond that sold at par value two years ago. If interest rates are much lower now than when this bond was issued, the coupon rate of that bond will likely be the...
** Please show work or explain If interest rates fall from 8 percent to 7 percent,...
** Please show work or explain If interest rates fall from 8 percent to 7 percent, which of the following bonds will have the largest percentage increase in its value? (If you are uncertain, do the examples yourself before answering!) a. A bond with 10 years to maturity, and a coupon rate of ZERO percent. b. A bond with 10 years to maturity, and a coupon rate of TEN percent. c. A bond with 5 years to maturity, and a...
6) Which of the following statements about bonds is true? A) If market interest rates are...
6) Which of the following statements about bonds is true? A) If market interest rates are above a bond's coupon interest rate, then the bond will sell below its par value. B) As the maturity date of a bond approaches, the market value of a bond will become more volatile. C) Bond prices move in the same direction as market interest rates. D) Long-term bonds have less interest rate risk than do short-term bonds.
If market interest rates increase, investors in corporate bonds will see the current market value of...
If market interest rates increase, investors in corporate bonds will see the current market value of their bonds do what in the secondary market? a. If the market interest rates increase, the coupon rate on the bond increases b. When market interest rates increase, the market value of corporate bonds increase c. Remain the same, because the face value never changes d. When market interest rates increase, the market value of corporate bonds decrease
a. If the level of interest rates increase (possibly due to an increase in expected inflation rates) for the overall eco...
a. If the level of interest rates increase (possibly due to an increase in expected inflation rates) for the overall economy, how do bond prices of existing, outstanding bonds react, and why? b. In other words it is a kind of debt security under which the seller is owed to the ... But higher the default risk premium, the more will be the required return 'r'. ... A 10-year bond has a face value of $1,000 with a coupon rate...
When interest rates shift, the price of zero coupon bonds are volatile Multiple Choice more; if...
When interest rates shift, the price of zero coupon bonds are volatile Multiple Choice more; if they have a short maturity rather than a long maturity not; because their duration always matches their maturity equally; regardless of their maturity. less; than coupon bonds of the same maturity. more; than coupon bonds of the same maturity. What is the duration of a bond with four years to maturity and a coupon of 9.5 percent paid annuallyif the bond sells at par?...
Explain the effect of interest rates on bond pricing and how maturity length and higher and...
Explain the effect of interest rates on bond pricing and how maturity length and higher and lower coupon rates can affect bond prices when interests go up and down in the economy.
QULUI All else the same, if interest rates fall, then 1. bond prices will rise II....
QULUI All else the same, if interest rates fall, then 1. bond prices will rise II. coupon payments will fall III. the percentage price change for short-term bonds will be greater than for long-term bonds IV. the percentage price change for high coupon bonds will be smaller than for low coupon bonds I and II only I, II, and IV only 1, II and Ill only III and IV only I and IV only
Two years ago bonds were issued which currently still have 10 years until maturity. When issued...
Two years ago bonds were issued which currently still have 10 years until maturity. When issued the bonds were selling at par, and had a 4% coupon (paid annually). If interest rates for that grade of bond are currently 4.25%, what will be the market price of these bonds? Calculate to 2 decimals. (Don't forget US bonds typically have a face value of $1,000). In the USA coupon payments are typically made twice a year. calculate the price of these...
9) Taussig Corp's bonds currently sell for $1.150. They have a 6.75% annual coupon rate 15-year maturity, they have been called in 6 years at $1.067.50. Under these conditions, whe rate of return should an investor expect to earn. Original par value is $1000. 10) Consider a coupon bond that sold at par value two years ago. If interest rates are much lower now than when this bond was issued, the coupon rate of that bond will likely be the...
6) Which of the following statements about bonds is true? A) If market interest rates are above a bond's coupon interest rate, then the bond will sell below its par value. B) As the maturity date of a bond approaches, the market value of a bond will become more volatile. C) Bond prices move in the same direction as market interest rates. D) Long-term bonds have less interest rate risk than do short-term bonds.
When interest rates shift, the price of zero coupon bonds are volatile Multiple Choice more; if they have a short maturity rather than a long maturity not; because their duration always matches their maturity equally; regardless of their maturity. less; than coupon bonds of the same maturity. more; than coupon bonds of the same maturity. What is the duration of a bond with four years to maturity and a coupon of 9.5 percent paid annuallyif the bond sells at par?...
QULUI All else the same, if interest rates fall, then 1. bond prices will rise II. coupon payments will fall III. the percentage price change for short-term bonds will be greater than for long-term bonds IV. the percentage price change for high coupon bonds will be smaller than for low coupon bonds I and II only I, II, and IV only 1, II and Ill only III and IV only I and IV only
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