Which of the following is TRUE about interest rates? Bond yield is the single discount rate...
Which of the following is TRUE about interest rates?
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Bond yield is the single discount rate that gives the value of the bond equal to its par (or principal) value. |
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Par yield is the coupon rate that causes bond price to equal to its market value. |
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A repo rate is the rate implicit in a transaction where securities are sold and bought back at a higher price. |
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A LIBOR rate is lower than the Treasury rate when the two have the same maturity. |
Homework Answers
True: 3rd option
This is called repurchasing agreement where securities are sold on collateral basis with an agreement that the same would be repurchased back in future. It is a short-term borrowing that has very little risk. Since the securities are bought back, such price becomes high.
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Which of the following is TRUE about interest rates?
Bond yield is the single discount rate...
4.Which one of the following statements about the approach to bond pricing is NOT true? Select...
4.Which one of the following statements about the approach to bond pricing is NOT true? Select one: A. To calculate a bond's price, one needs to calculate the present value of the bond's expected cash flows. B. The value, or price, of any asset is the future value of its cash flows. 6.Which one of the following statements is NOT true? Select one: A. The yield to maturity of a bond is the discount rate that makes the present value...
15. Which of the following is CORRECT about the arbitrage-free price of a coupon bond? The...
15. Which of the following is CORRECT about the arbitrage-free price of a coupon bond? The sum arbitrage-free price of a coupon bond. The coupon of the present value of all cash flows (discounted at the required yield) is the A. B. C. The the present value of all cash flows (discounted at the spot rate of the bond's final term to maturity) is the arbitrage-free price of a coupon bond. of the present value of all cash flows (discounted...
Bond Bond Value Current Yield Bond A Bond B Bond C Discount Rate 5.00% 15.00% 15.60%...
Bond Bond Value Current Yield Bond A Bond B Bond C Discount Rate 5.00% 15.00% 15.60% Roen is planning to invest in five-year, 15% annual coupon bonds with a face value of $1,000 each. Complete the table by calculating the value of each bond and the current yields at the various discount rates. There is a distinct relationship between the coupon rate, the discount rate, and a bond's price relative to its par value. Based on your preceding calculations, complete...
The return to bondholders is guaranteed to equal the yield to maturity only if the bond...
The return to bondholders is guaranteed to equal the yield to maturity only if the bond is held until maturity. True False The discount rate that makes the present value of a bond's payments equal to its price is termed the: A. dividend yield B. yield to maturity C. current yield D. coupon rate Assume a bond is currently selling at par value. What will happen in the future if the yield on the bond is lower than the coupon...
If interest rates did not change from now until this bond's maturity,a bond with a yield...
If interest rates did not change from now until this bond's maturity,a bond with a yield of 7% and a coupon rate of 8% would: Group of answer choices: A) it would not be trading at all since the coupon does not equal the yield in the market. B) trade at a discount right now. Its price would gradually increase until it reaches par at maturity. C) trade at par. D) trade at a premium right now. Its price would...
Which of the following statements is CORRECT? A bond's current yield must always be either equal...
Which of the following statements is CORRECT? A bond's current yield must always be either equal to its yield to maturity or between its yield to maturity and its coupon rate. If a bond sells at par, then its current yield will be less than its yield to maturity. If a bond sells for less than par, then its yield to maturity is less than its coupon rate. A discount bond's price declines each year until it matures, when its...
The Federal Reserve purchases U.S. Treasury securities to: increase interest rates Oincrease the money supply O...
The Federal Reserve purchases U.S. Treasury securities to: increase interest rates Oincrease the money supply O decrease expected inflation. increase tax rates reduce credit availability If a bond's yield to maturity exceeds its coupon rate, the bond's: maturity value is more than its face value price must be less than its par value current yield is equal to the capital gain on the maturity of the bond. current yield is equal to the coupon rate. maturity value is less than...
For a discount bond, its coupon rate is_ than its yield to maturity and its price...
For a discount bond, its coupon rate is_ than its yield to maturity and its price is expected to __over the years. A B. C. D. Greater; increase Greater; decrease Lower; increase Lower; decrease A corporate bond has a 30-year maturity and pays interest annually. The quoted coupon rate is 10% and the bond is priced at par. The boond is callable in 5 years at 120% of par. What is the bonds yield to call? (Choose the closest one)...
Which statement about yield is correct? For a coupon bond, if the yield is higher than...
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A discount bond will have a negative nominal interest rate when the: A. bond is sold...
A discount bond will have a negative nominal interest rate when the: A. bond is sold long before its maturity date. B. current bond price is greater than its face value. OC sum of the annual coupon payments and the face value of the bond is higher than its current price. O D current bond yield is smaller than its yield to maturity Which of the following statements is true? O A. Both a coupon bond and a perpetuity can...
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The Federal Reserve purchases U.S. Treasury securities to: increase interest rates Oincrease the money supply O decrease expected inflation. increase tax rates reduce credit availability If a bond's yield to maturity exceeds its coupon rate, the bond's: maturity value is more than its face value price must be less than its par value current yield is equal to the capital gain on the maturity of the bond. current yield is equal to the coupon rate. maturity value is less than...
For a discount bond, its coupon rate is_ than its yield to maturity and its price is expected to __over the years. A B. C. D. Greater; increase Greater; decrease Lower; increase Lower; decrease A corporate bond has a 30-year maturity and pays interest annually. The quoted coupon rate is 10% and the bond is priced at par. The boond is callable in 5 years at 120% of par. What is the bonds yield to call? (Choose the closest one)...
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