Indicate whether the statement is true, false, or uncertain, and explain why. Your answers should be...
Indicate whether the statement is true, false, or uncertain, and explain why. Your answers should be short and concise.
-
The call feature reduces the expected life of the bond.
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The value of a Treasury bond should be equal to the sum of the values of the STRIPs created from it.
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According to the Expectations Hypothesis, an upward sloping yield curve is based on the expectation that short-term interest rates will increase.
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An upward sloping yield curve necessarily implies expectations of higher future interest rates.
Homework Answers
True, call feature reduce the expected life of the bond because bond issuer has a right to call its bond any time before it reaches the stated maturity period.
False, the value of the treasury bond should not be equal to the sum of the value of strips created from it because treasury strips are fixed income securities that are sold at discount to face value, STRIPS don't offer interest payments, because they mature at par. STRIPS are Zero coupon bonds that arise when the bonds coupons are separated from the bond.
True, because bond has no risk premium associated with it which is related to its price. The single reason due to which long-term yields which may result in yield curve being upward, the investor wants to economic growth and based on their forecasted inflation they prefer long term securities over short term securities.
True, because Upward slopping Yield curves means long term bonds have higher Yields which states to higher future Interest rates.
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Indicate whether the statement is true, false, or uncertain, and
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i. Duration of a coupon bonds have been increased.
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yield curve became flattened), which of the following statements
are CORRECT? (*Note: This question was set to be multiple answer
instead of multiple choice by mistake. You are supposed to choose
only one of the following options.)
i. Duration of a coupon bonds have been increased.
ii. % Change in duration for high coupon bonds are higher for
high coupon bonds than small coupon bonds (both have the...
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