Given that two bonds have the same maturity, yield to maturity and different coupon rate, which...
Given that two bonds have the same maturity, yield to maturity and different coupon rate, which of the following is true? Is it A.The high coupon bond will be sold for premium. B. The lower coupon bond will be sold for premium. C.The high coupon bond will have higher interest rate risk., D.The low coupon rate bond will have higher interest rate risk.?
Homework Answers
.The low coupon rate bond will have higher interest rate risk
For the same time to maturity, a lower coupon bond will have greater change in price when market interest rate changes than a bond with higher coupon rate. This is called coupon effect.
Add Answer to:
Given that two bonds have the same maturity, yield to maturity
and different coupon rate, which...
1. Two 5 year corporate Bonds (A and B) have the same credit quality and coupon...
1. Two 5 year corporate Bonds (A and B) have the same credit quality and coupon rate, but bond A is more liquid than bond B. Which bond should have a higher yield to maturity/ interest rate? 2. Diversification helps reduce risk. Hence if we keep adding stocks to our portfolio, the risk of the portfolio will eventually decrease to zero. (True or False)
The prices of low-coupon bonds tend to be less sensitive to a given change in interest...
The prices of low-coupon bonds tend to be less sensitive to a given change in interest rates than high coupon bonds, other things held constant. O O True False There is an inverse relationship between bonds' quality ratings and their required rates of return. Thus, the required return is lowest for AAA-rated bonds, and required returns increase as the bond ratings get lower. O True or False What's TRUE regarding long-term and short-term bonds (assume they have the same par...
Bond A has a 12-year maturity, a 5% semi-annual coupon, and a yield of 43%. Bond...
Bond A has a 12-year maturity, a 5% semi-annual coupon, and a yield of 43%. Bond B has a 12-year maturity a 3% coupon, and a yield of 4,3%. What must be true about the two bonds? A. Bond B has greater interest-rate risk OB. Bond A must be speculative grade since it has a higher coupon and the same yield O G. Bond B must be speculative grade since it has a lower coupon and the same yield O...
If a coupon bond has two years to maturity, a coupon rate of 10%, a par...
If a coupon bond has two years to maturity, a coupon rate of 10%, a par value of S900, and a yield to maturity of 14%, then the coupon bond will sell for $(Round your response to the nearest two decimal place The price of a bond and its yield to maturity are Which of the following statements is not true? O A. Current yield is a worse approximation of yield to maturity for long-term bonds when compared to short-term...
If a coupon bond has two years to maturity, a coupon rate of 8%, a par...
If a coupon bond has two years to maturity, a coupon rate of 8%, a par value of $800, and a yield to maturity of 12%, then the coupon bond will sell for $ (Round your response to the nearest two decimal place) The price of a bond and its yield to maturity are Positively related, negitively related, or unrelated. which of the following statements is not true? A. The longer to maturity, the greater is the change in the...
The yield to maturity on one-year zero-coupon bonds is 8.2%. The yield to maturity on two-year zero-coupon bonds is 9.2%. a. What is the forward rate of interest for the second year? (Do not round in...
The yield to maturity on one-year zero-coupon bonds is 8.2%. The yield to maturity on two-year zero-coupon bonds is 9.2%. a. What is the forward rate of interest for the second year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Forward rate of interest b. If you believe in the expectations hypothesis, what is your best guess as to the expected value of the short-term interest rate next year? (Do not r answer to 2 decimal...
If two bonds with different coupon rates have the same maturity, which one will fluctuate more...
If two bonds with different coupon rates have the same maturity, which one will fluctuate more as interest rates change? Explain./
when the coupon the All else constant, a bond will sell at yield to maturity a...
when the coupon the All else constant, a bond will sell at yield to maturity a premium; less than a premium; equal to a discount; less than D. a discount; higher than par; less than с. 4 The Walthers Company has a semi-annual coupon bond outstanding tanding. An increase in the market rate of interest will have which of the following effects which of the following effects on the bond? increase the coupon rate decrease the coupon rate increase the...
a) ABC Ltd issues two different bonds, a 5-year semi-annual coupon bond and a 10-year zero...
a) ABC Ltd issues two different bonds, a 5-year semi-annual coupon bond and a 10-year zero coupon bond with the same yield to maturity. Explain which bond is subject to more interest rate risk.
The yield to maturity on one-year zero-coupon bonds is 7.1%. The yield to maturity on two-year...
The yield to maturity on one-year zero-coupon bonds is 7.1%. The yield to maturity on two-year zero-coupon bonds is 8.1%. a. What is the forward rate of interest for the second year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete and correct. Forward rate of interest 9.10 % b. If you believe in the expectations hypothesis, what is your best guess as to the expected value of the short-term interest rate next year?...
The prices of low-coupon bonds tend to be less sensitive to a given change in interest rates than high coupon bonds, other things held constant. O O True False There is an inverse relationship between bonds' quality ratings and their required rates of return. Thus, the required return is lowest for AAA-rated bonds, and required returns increase as the bond ratings get lower. O True or False What's TRUE regarding long-term and short-term bonds (assume they have the same par...
Bond A has a 12-year maturity, a 5% semi-annual coupon, and a yield of 43%. Bond B has a 12-year maturity a 3% coupon, and a yield of 4,3%. What must be true about the two bonds? A. Bond B has greater interest-rate risk OB. Bond A must be speculative grade since it has a higher coupon and the same yield O G. Bond B must be speculative grade since it has a lower coupon and the same yield O...
If a coupon bond has two years to maturity, a coupon rate of 10%, a par value of S900, and a yield to maturity of 14%, then the coupon bond will sell for $(Round your response to the nearest two decimal place The price of a bond and its yield to maturity are Which of the following statements is not true? O A. Current yield is a worse approximation of yield to maturity for long-term bonds when compared to short-term...
The yield to maturity on one-year zero-coupon bonds is 8.2%. The yield to maturity on two-year zero-coupon bonds is 9.2%. a. What is the forward rate of interest for the second year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Forward rate of interest b. If you believe in the expectations hypothesis, what is your best guess as to the expected value of the short-term interest rate next year? (Do not r answer to 2 decimal...
If two bonds with different coupon rates have the same maturity, which one will fluctuate more as interest rates change? Explain./
when the coupon the All else constant, a bond will sell at yield to maturity a premium; less than a premium; equal to a discount; less than D. a discount; higher than par; less than с. 4 The Walthers Company has a semi-annual coupon bond outstanding tanding. An increase in the market rate of interest will have which of the following effects which of the following effects on the bond? increase the coupon rate decrease the coupon rate increase the...
The yield to maturity on one-year zero-coupon bonds is 7.1%. The yield to maturity on two-year zero-coupon bonds is 8.1%. a. What is the forward rate of interest for the second year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete and correct. Forward rate of interest 9.10 % b. If you believe in the expectations hypothesis, what is your best guess as to the expected value of the short-term interest rate next year?...
Most questions answered within 3 hours.
-
An MNE is this kind of industry when competition in one country
is essentially independent of...
asked 39 minutes ago -
. For this set of questions, determine what
proportion of a normal distribution is located betweeneach...
asked 1 hour ago -
A college student is employed as a door-to-door newspaper
salesman. Historical data suggests that the student...
asked 2 hours ago -
MATLAB HW 11 problem using Switch Case and Input commands
Write a script file that calculates...
asked 1 hour ago -
Considering gravitational time dilation, calculate the time that
passes in Earth’s surface while 1 hour passes...
asked 2 hours ago -
Minitab Problem: Take the Lake Hume June rainfall data and find
use the processes outlined in...
asked 3 hours ago -
X Company is trying to decide whether to continue using old
equipment to make Product A...
asked 3 hours ago -
IN PYTHON ONLY !! Program 2: Re-work
program #5 (WeeklyHours) from the previous assignment such that...
asked 4 hours ago -
The average length of time between arrivals at a turnpike
toll-booth is 26 seconds. What is...
asked 5 hours ago -
(a) A piston at 6.1 atm contains a gas that occupies a volume of
3.5 L....
asked 6 hours ago -
Please answer true or false. Words
cannot be changed or added in to make it true...
asked 6 hours ago -
An empty test tube weighs 15.923 grams. Then,
MgCl2•6H2O is added into the test tube. After...
asked 6 hours ago