Homework Answers
relationship between dicount rate and bond price
Interest rate risk is the risk that changing interest rates will affect bond prices. When current interest rates are greater than a bond's coupon rate, the bond will sell below its face value at a discount. When interest rates are less than the coupon rate, the bond can be sold at a premium--higher than the face value. A bond's interest rate is related to the current prevailing interest rates and the perceived risk of the issuer.
Hence there is an inverse relationship.
IN CASE PRICE RISES OR FALLS
IN CASE MARKET 
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Question 16. Describe the relationship between discount rate and bond price Question 17 Assume a bond...
10. Draw the relationship between interest (discount) rate (X) and the price of a callable bond (...
10. Draw the relationship between interest (discount) rate (X) and the price of a callable bond (Y) with a call price 0
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Hialurily date. • A bond issuer is said to be in default if it does not...
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1st blank options = par value, coupon payment, price 2nd blank options = bankruptcy, default, liquidation...
1st blank options = par value, coupon payment, price
2nd blank options = bankruptcy, default, liquidation
3rd blank options = convertible provision, sinking fund
provision, call provision
4th blank options= call provision, call premium,
convertibility provision
5th blank options = floating-rate, fixed-rate
6th blank options = indenture, trustee, debenture
7th = multiple choice
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10. Draw the relationship between interest (discount) rate (X) and the price of a callable bond (Y) with a call price 0
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Hialurily date. • A bond issuer is said to be in default if it does not pay the interest or the principal in accordance with the terms of the indenture! agreement or if it violates one or more of the issue's restrictive covenants. • A bond contract feature that requires the issuer to retire a specified portion of the bond issue each year is called a sinking fund provision • A bond's call provision gives the issuer the right to...
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...
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1st blank options = par value, coupon payment, price
2nd blank options = bankruptcy, default, liquidation
3rd blank options = convertible provision, sinking fund
provision, call provision
4th blank options= call provision, call premium,
convertibility provision
5th blank options = floating-rate, fixed-rate
6th blank options = indenture, trustee, debenture
7th = multiple choice
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