Answer: The correct option is C
Yield to maturity (YTM) of bond A is 8%, and bond B is 6%. The
interest rate risk is inversely proportional to YTM. So, lower YTM
means higher interest rate risk and vice versa. So, bond B will
have greater interest rate risk.
Option A is incorrect: When a company is unable to meet its
short term financial demands, it is referred to as liquidity risk,
if credit rating falls, the chance of liquidity risk increases. As
nothing has been mentioned about the rating, we cannot say which
bond will have liquidity risk.
Option B is incorrect: Nothing has been mentioned about the rating
of the bond.
Option D is incorrect: Bond A is not more valuable
Bond A has a 10-year maturity, a 4,5% semi-annual coupon and a yield of 8%. Bond...
Bond A has a 12-year maturity, a 5% semi-annual coupon, and a yield of 43%. Bond B has a 12-year maturity a 3% coupon, and a yield of 4,3%. What must be true about the two bonds? A. Bond B has greater interest-rate risk OB. Bond A must be speculative grade since it has a higher coupon and the same yield O G. Bond B must be speculative grade since it has a lower coupon and the same yield O...
A $1,000 par bond with an 8% semi-annual coupon sells at a discount to par. What must be true about the bond? A. It is underpriced B. It is in default C. It has a yield to maturity greater than 8% D. None of the above
a) ABC Ltd issues two different bonds, a 5-year semi-annual coupon bond and a 10-year zero coupon bond with the same yield to maturity. Explain which bond is subject to more interest rate risk.
A 10-year bond with a 9% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT? The bond is selling below its par value. The bond is selling at a premium. The bond's current yield is greater than 9%. The bond is selling at a discount. If the yield to maturity remains constant, the bond's price one year from now will be higher than its current price.
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7. An annual-pay, 4% coupon, 10-year bond has a yield to maturity of 5.2%. If the price of this bond is unchanged two years later, its yield to maturity at that time is: * A. 5.2%. B. less than 5.2%. C. greater than 5.2%. D. Cannot be determined. O E. None of the above.
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If a coupon bond has two years to maturity, a coupon rate of 10%, a par value of S900, and a yield to maturity of 14%, then the coupon bond will sell for $(Round your response to the nearest two decimal place The price of a bond and its yield to maturity are Which of the following statements is not true? O A. Current yield is a worse approximation of yield to maturity for long-term bonds when compared to short-term...