What’s a bonds coupon rate and is that the same as interest rate. Why are bonds...
Homework Answers
Bond coupon rate is the same as interest rate it is the amount of interest paid at the regular interval of time .
For example if the bond face value is $100 and coupon rate is 5 % this means that you will earn $5 as interest .
Bonds are sold at discount this means that bonds are sold at a value lower than the face value of the bond if the discount rate of the bond is lower than the coupon rate then the bond is sold at discount.
Bonds are sold at a premium this means that bonds are sold at a price higher than the face value of the bond if the discount rate of the bond is higher than the coupon rate than the bond is sold at premium.
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What’s a bonds coupon rate and is that the same as interest rate.
Why are bonds...
I = 2%, a firm’s 30 years annually compounded bond has 2% coupon interest rate. What’s...
I = 2%, a firm’s 30 years annually compounded bond has 2% coupon interest rate. What’s the default par value? What’s the formula of bond valuation? What’s the coupon at each end of period? what’s the value of bond? What if the I = 5% and the coupon interest rate is changed to 10%, what’s the bond valuation? As an investor, you will buy which type of bond? e? or original?
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.?
State why zero-coupon bonds are sold at steep discounts.
State why zero-coupon bonds are sold at steep discounts.
15. Zero coupon bonds are bonds that are issued: a) With a zero effective interest rate....
15. Zero coupon bonds are bonds that are issued: a) With a zero effective interest rate. b) At a rate that provides a large discount at issuance. c) At a rate that has zero difference between the coupon rate and the market rate of interest. d) As bonds that will have zero amortization recorded over the life of the bond.
12. Eaton Company issued $5 million of bonds with a 10 % coupon rate of interest....
12. Eaton Company issued $5 million of bonds with a 10 % coupon rate of interest. When Eaton issued the bonds, the market rate of interest was 10 %. Which of the following statements is incorrect? a) The bonds were issued at par. b) Annual interest expense will equal the company's annual cash payments for interest. The book value of the bonds will decrease as cash interest payments are made. c) d) Annual interest expense is the same regardless of...
Which is the following is not true? Zero-coupon bonds always mature earlier than coupon bonds Bonds...
Which is the following is not true? Zero-coupon bonds always mature earlier than coupon bonds Bonds that pay no annual interest (coupons) but are sold at a discount below par, thus compensating investors in the form of capital appreciation are called zero-coupon bonds A provision in a bond contract that gives the issuer the right to redeem the bonds under specified terms prior to the normal maturity date is a call provision Original maturity refers to the number of years...
ABC Crp. issued $8,000,000 of 8% debentures on January 1,2018. The bonds pay interest semiannually on...
ABC Crp. issued $8,000,000 of 8% debentures on January 1,2018. The bonds pay interest semiannually on July 1 and January 1. The maturity date on these bonds is January 1, 2026. The firm uses the effective interest method of amortizing discounts and premiums. The bonds were sold to yield an effective interest rate of 10%. Required: Compute the present Value of bonds and amortization table
Complex Systems has an outstanding issue of $1,000-par-value bonds with a 12% coupon interest rate. The...
Complex Systems has an outstanding issue of $1,000-par-value bonds with a 12% coupon interest rate. The issue pays interest annually and has 16 years remaining to its maturity date. a. If bonds of similar risk are currently earning a 10% rate of return, how much should the Complex Systems bond sell for today? b. Describe the two possible reasons why the rate on similar-risk bonds is below the coupon interest rate on the Complex Systems bond. c. If the required...
ABC Corp. issued $8,000,000 of 8% debentures on January 1, 2018. The bonds pay interest semiannually...
ABC Corp. issued $8,000,000 of 8% debentures on January 1, 2018. The bonds pay interest semiannually on July 1 and January 1. The maturity date on these bonds is January 1, 2026. The firm uses the effective-interest method of amortizing discounts and premiums. The bonds were sold to yield an effective interest rate of 10%. Required: Compute the present value of the bonds and the amortization table. During the test, I will provide additional instructions.
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...
15. Zero coupon bonds are bonds that are issued: a) With a zero effective interest rate. b) At a rate that provides a large discount at issuance. c) At a rate that has zero difference between the coupon rate and the market rate of interest. d) As bonds that will have zero amortization recorded over the life of the bond.
12. Eaton Company issued $5 million of bonds with a 10 % coupon rate of interest. When Eaton issued the bonds, the market rate of interest was 10 %. Which of the following statements is incorrect? a) The bonds were issued at par. b) Annual interest expense will equal the company's annual cash payments for interest. The book value of the bonds will decrease as cash interest payments are made. c) d) Annual interest expense is the same regardless of...
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...
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