Which is NOT a correct statement on bonds? A. For a given bond, we can calculate...
Which is NOT a correct statement on bonds?
A. For a given bond, we can calculate a unique yield for every positive price
B. For a given bond, price and yield and negatively related
C. If yield is equal to the coupon rate, then the price (excluding the imminent coupon) is equal to 100 on coupon payment dates
D. The actual return one gets when investing in a bond is equal to the coupon rate
Homework Answers
The incorrect statement is:-
D. The actual return one gets when investing in a bond is equal to the coupon rate
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Which is NOT a correct statement on bonds?
A. For a given bond, we can calculate...
Which statement about yield is correct? For a coupon bond, if the yield is higher than...
Which statement about yield is correct? For a coupon bond, if the yield is higher than the coupon rate, then price>100 A zero-coupon bond may be priced above 100, assuming yield is positive For a given bond, the corresponding yield for price P1 is y1, and the yield for P2 is y2. If P1>P2, then y1<y2 The yield of a corporate bond is usually lower than the yield of a treasury debt, assuming the same maturity and coupon rate
Which of the following statements is CORRECT? a. The market price of a bond will always...
Which of the following statements is CORRECT? a. The market price of a bond will always approach its par value as its maturity date approaches, provided the bond’s required return remains constant. b. If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices. c. The total yield on a bond is derived from dividends plus changes in the price of the bond. d. Bonds are generally regarded...
The following are correct descriptions about general characteristics of Bonds, EXCEPT: Question 3 options: Bonds in...
The following are correct descriptions about general characteristics of Bonds, EXCEPT: Question 3 options: Bonds in general generate a fixed coupon payment every period, until maturity expires. A bond that offers a fixed coupon payment in perpetuity is called a console. If the market interest rate increases, then the current price for bonds will increase. If the current price of a bond increases, its yield to maturity (YTM) will decrease.
We've always treated bond pricing as if we have a constant return. We know that cash...
We've always treated bond pricing as if we have a constant return. We know that cash flows given at different times are discounted slightly differently when we think about the yield curve. Let's go through bond pricing utilizing the information gained from our yield curve. Suppose I have the following bond prices. Assume these are zero coupon bonds with a par value of $1000 Time To Maturity Price $958.23 1 yr 2 yr $931.12 $815.20 3 yr 4 уг 5...
Which of the following statement is not true about interest rate risk? (Only one correct answer.)...
Which of the following statement is not true about interest rate risk? (Only one correct answer.) Select one: a. Long term bonds have higher interest rate risk than short term bonds. ob. Interest rate risk is the uncertainty of how the bond price will change following the interest rate changes. c. Lower coupon bonds have lower interest rate risk. d. Bond prices are negatively related to interest rate movements.
Which statement about bond prices is most accurate? Select one: a. For a premium bond the...
Which statement about bond prices is most accurate? Select one: a. For a premium bond the yield to maturity is less than the coupon rate b. With an interest rate increase the price rises more for long-term bonds than short-term bonds c. With an interest rate decline the price rises more for short-term bonds than long-term bonds d. For a discount bond the coupon rate is more than the yield-to-maturity e. The answers included are not correct
Which of the following statement is most correct? If a bond yield to maturity exceeds its...
Which of the following statement is most correct? If a bond yield to maturity exceeds its coupon rate, the bond’s current yield must also exceed its coupon rate. If a bond’s yield to maturity exceeds its coupon rate, the bond’s price must be less than its maturity value. If two bonds have the same maturity, the same yield to maturity, and the same level of risk, the bonds should sell the same price regardless of the bond’s coupon rate Answers...
"If the investment horizon is equal to the Macaulay duration of the bond, the investor is...
"If the investment horizon is equal to the Macaulay duration of the bond, the investor is hedged against interest rate risk". However, the above statement is only true if interest rates only change before fist coupon payment is received. Using the following bond to show that if interest rate increases 2% between first and second coupon payment dates, the investor is not hedged against interest rate risk even if his duration gap is zero.: A four-year 33.7% annual coupon paying...
(Bond valuation) Calculate the value of a bond that will mature in 17 years and has...
(Bond valuation) Calculate the value of a bond that will mature in 17 years and has a $1,000 face value. The annual coupon interest rate is 11 percent, and the investor's required rate of return is 14 percent The value of the bond is S828.27 (Round to the nearest cent. (Bond valuation) Calculate the value of a bond that will mature in 14 years and has a $1.000 face value. The annual coupon interest rate is 5 percent, and the...
You are considering the following bonds to include in your portfolio: Bond 1 Bond 2 Bond...
You are considering the following bonds to include in your portfolio: Bond 1 Bond 2 Bond 3 Price $900.00 $1,100.00 $1,000.00 Face Value $1,000.00 $1,000.00 $1,000.00 Coupon Rate 7.00% 10.00% 9.00% Frequency 1 2 4 Maturity (Years) 15 20 30 Required Return 9.00% 8.00% 9.00% Determine the highest price you would be willing to pay for each of these bonds using the PV function. Also find whether the bond is undervalued, overvalued, or fairly valued. Determine the yield to maturity...
We've always treated bond pricing as if we have a constant return. We know that cash flows given at different times are discounted slightly differently when we think about the yield curve. Let's go through bond pricing utilizing the information gained from our yield curve. Suppose I have the following bond prices. Assume these are zero coupon bonds with a par value of $1000 Time To Maturity Price $958.23 1 yr 2 yr $931.12 $815.20 3 yr 4 уг 5...
Which of the following statement is not true about interest rate risk? (Only one correct answer.) Select one: a. Long term bonds have higher interest rate risk than short term bonds. ob. Interest rate risk is the uncertainty of how the bond price will change following the interest rate changes. c. Lower coupon bonds have lower interest rate risk. d. Bond prices are negatively related to interest rate movements.
(Bond valuation) Calculate the value of a bond that will mature in 17 years and has a $1,000 face value. The annual coupon interest rate is 11 percent, and the investor's required rate of return is 14 percent The value of the bond is S828.27 (Round to the nearest cent. (Bond valuation) Calculate the value of a bond that will mature in 14 years and has a $1.000 face value. The annual coupon interest rate is 5 percent, and the...
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