Homework Answers
The answer is
Straight < Callable < Convertible
Value of straight bond is lowest as it does not contain added options
Callable bonds are priced higher than straight bonds
Convertible bonds can be converted into shares and hence, have higher value
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Question 3 2 pts All else equal, which of the following relation is true? Assume all...
QUESTION 1 Assume a project has normal cash flows. All else equal, which of the following...
QUESTION 1 Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT? A project's IRR increases as the WACC declines. A project's NPV increases as the WACC declines. A project's MIRR is unaffected by changes in the WACC. A project's regular payback increases as the WACC declines. A project's discounted payback increases as the WACC declines. QUESTION 2 Gul Corp. considers the following capital structure optimal: 40% debt; 50% equity; and 10% preferred...
All else equal, the price of which of the following bonds is least sensitive to a...
All else equal, the price of which of the following bonds is least sensitive to a three percentage point increase in interest rates? A 12-year 0% coupon bond A 12-year 7% coupon bond This cannot be solved with the provided information A 2-year 7% coupon bond A 2-year 0% coupon bond
Question 6 1 pts The issue price of a bond is: determined by the company issuing...
Question 6 1 pts The issue price of a bond is: determined by the company issuing the bonds. based on a present value calculation. determined by the financial advisers. always equal to $1,000. Question 5 1 pts Disco World began its business on November 1 and sold contracts to twelve students for dance lessons that day. The lessons cost $375 per person for a three-month period and the students are required to pay in advance. Use the information above to...
4. Which of the following statements is true, holding all else equal? I. If inflation increases...
4. Which of the following statements is true, holding all else equal? I. If inflation increases and investors' real rate of return stays the same, bond prices tend to decrease II. If investors' real rate of return decreases and inflation stays the same, bond prices tend to increase III. If the yield to maturity on a bond increases, the bond's coupon rate will increase I onl II only 1 and 11 only II and III only C. e. I, II,...
Questions 1 to 10 are false statements. Please re-write each statement so that it is true....
Questions 1 to 10 are false statements. Please re-write each statement so that it is true. It may be as simple as one word change or more complex. 1. A callable bond is one in which the issuer is required to retire a certain amount of the outstanding bonds each year to ensure that all the bond principle is paid by final maturity. 2. There is no default risk with either Treasury bonds or municipal bonds. 3. The dirty price...
5 pts Question 8 Which one of the following terms applies to a bond that can...
5 pts Question 8 Which one of the following terms applies to a bond that can be exchanged for the issuing company's common stock in the future? Callable . Municipal Zero coupon Convertible
Questions 1 to 10 are false statements. Please re-write each statement so that it is true. It may be as simple as one wo...
Questions 1 to 10 are false statements. Please re-write each statement so that it is true. It may be as simple as one word change or more complex. 5. The way that TIPS protect against inflation is because the coupon rate is changed every six months by the inflation rate as measured by the consumer price index (CPI). 6. All else equal, (maturity, coupon rate, face value, etc.) a bond that is callable should have a lower yield-to-maturity than a...
Show all work please. True/False 7 points each. Circle the correct answer. Callable bonds have an...
Show all work please.
True/False 7 points each. Circle the correct answer. Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity. True False An annuity is a series of equal payments at equal time intervals. True False Multiple Choice 5 points each. Circle the correct answer. 74. Bonds owned by investors whose names and addresses are recorded by the issuing company, and for which interest payments are made with...
12. Price risk and reinvestment rate risk Aa Aa Which of the following statements are true?...
12. Price risk and reinvestment rate risk Aa Aa Which of the following statements are true? Check all that apply. Bonds with similar coupons will always have the same percentage price change, no matter the maturity. Rising interest rates cause the value of outstanding bonds to decrease A decline in interest rates will lead to a decline in the price of an outstanding bond To minimize interest rate risk, an investor should buy long-term bonds. Which of the following bonds...
Why is all incorrect Which of the following statements is most correct? a. All else equal,...
Why is all incorrect
Which of the following statements is most correct? a. All else equal, if a bond's expected yield to maturity decreases, its price will fall. b. All else equal, if a bond's yield to maturity increases, its current yield will fall. c. If a bond's yield to maturity exceeds the coupon rate, the bond will sell at a premium over 4. par d. All of the statements above are correct e) None of the statements above is...
All else equal, the price of which of the following bonds is least sensitive to a three percentage point increase in interest rates? A 12-year 0% coupon bond A 12-year 7% coupon bond This cannot be solved with the provided information A 2-year 7% coupon bond A 2-year 0% coupon bond
Question 6 1 pts The issue price of a bond is: determined by the company issuing the bonds. based on a present value calculation. determined by the financial advisers. always equal to $1,000. Question 5 1 pts Disco World began its business on November 1 and sold contracts to twelve students for dance lessons that day. The lessons cost $375 per person for a three-month period and the students are required to pay in advance. Use the information above to...
4. Which of the following statements is true, holding all else equal? I. If inflation increases and investors' real rate of return stays the same, bond prices tend to decrease II. If investors' real rate of return decreases and inflation stays the same, bond prices tend to increase III. If the yield to maturity on a bond increases, the bond's coupon rate will increase I onl II only 1 and 11 only II and III only C. e. I, II,...
5 pts Question 8 Which one of the following terms applies to a bond that can be exchanged for the issuing company's common stock in the future? Callable . Municipal Zero coupon Convertible
Show all work please.
True/False 7 points each. Circle the correct answer. Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity. True False An annuity is a series of equal payments at equal time intervals. True False Multiple Choice 5 points each. Circle the correct answer. 74. Bonds owned by investors whose names and addresses are recorded by the issuing company, and for which interest payments are made with...
12. Price risk and reinvestment rate risk Aa Aa Which of the following statements are true? Check all that apply. Bonds with similar coupons will always have the same percentage price change, no matter the maturity. Rising interest rates cause the value of outstanding bonds to decrease A decline in interest rates will lead to a decline in the price of an outstanding bond To minimize interest rate risk, an investor should buy long-term bonds. Which of the following bonds...
Why is all incorrect
Which of the following statements is most correct? a. All else equal, if a bond's expected yield to maturity decreases, its price will fall. b. All else equal, if a bond's yield to maturity increases, its current yield will fall. c. If a bond's yield to maturity exceeds the coupon rate, the bond will sell at a premium over 4. par d. All of the statements above are correct e) None of the statements above is...
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