when the coupon rate on a standard coupon bond increases,the duration of the bond increase?True or...
when the coupon rate on a standard coupon bond increases,the duration of the bond increase?True or False.explain?
Homework Answers
Most bonds have fixed coupon rate which is independent of the rate of interest fluctuating with the market price. Hence annual coupon payment remains fixed. The yield on the bond changes as the value of bond changes and gives the yield to maturity. Hence coupon bond is a long term investment and if the duration of the bond increases then coupon rate would also increase.
the correct option is True
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when the coupon rate on a standard coupon bond increases,the
duration of the bond increase?True or...
For a standard semi-annual coupon bond, when price of the bond decreases, which of the following...
For a standard semi-annual coupon bond, when price of the bond decreases, which of the following is true: The rate of return of the bond falls. The present value of the bond’s remaining cash flows declines. The coupon amount increases. The bond is called a premium bond. None of these.
Compute the duration of a bond with a face value of $1,000, a coupon rate of 7% (coupon is paid annually) and a maturity...
Compute the duration of a bond with a face value of $1,000, a coupon rate of 7% (coupon is paid annually) and a maturity of 10 years as the interest rate (or yield to maturity) on the bond changes from 2% to 12% (consider increments of 1% - so you need to compute the duration for various yields to maturity 2%, 3%, …, 12%) . What happens to duration as the interest rate increases?
38. The duration of a $1000, 2-year, 6% coupon bond (interest paid annually) is _____...
38. The duration of a $1000, 2-year, 6% coupon bond (interest paid annually) is _____ when market rates are 8%. The 8% PV factors are: .9259 1 YR; .8573 2 YR a. 2.036 b. 1.971 c. 1.94 d. 1.856 39. As bond maturity _________, so does the _________ and ________. a. decreases; coupon rate; market price. b. decreases; duration; face value. c. increases; duration; price variability. d. increases; market price; coupon rate.
a. What is the duration of a zero-coupon bond that has twelve years to maturity? Duration...
a. What is the duration of a zero-coupon bond that has twelve years to maturity? Duration of the bond years b. What is the duration if the maturity increases to 14 years? Duration of the bond years c. What is the duration if the maturity increases to 16 years? Duration of the bond years
The duration of a twenty year, 6 percent coupon bond when the interest rate is 7.80...
The duration of a twenty year, 6 percent coupon bond when the interest rate is 7.80 years. What happens to the price of the bond if the interest rates rises to 8%? it rises 15.6% it rises 14.7% it falls 15.6% it falls 14.7%
The market price of a bond increases when the: coupon rate decreases. par value decreases. coupon...
The market price of a bond increases when the: coupon rate decreases. par value decreases. coupon is paid annually rather than semiannually. face value decreases. discount rate decreases.
All else held constant, the present value of a bond increases when the: coupon rate decreases....
All else held constant, the present value of a bond increases when the: coupon rate decreases. yield to maturity decreases. current yield increases. time to maturity of a premium bond decreases. time to maturity of a zero coupon bond increases.
"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...
: A bond has a 7.5% annual coupon rate with 4 years to maturity and pays annual...
: A bond has a 7.5% annual coupon rate with 4 years to maturity and pays annual coupon What is the price of the bond if the yield to maturity is 5% 1.2 What is price of the bond if the yield to maturity increases by 0.2%? What is the % change in the price of the bond when yield increases by 0.2%? 1.4 What is the bond duration? What is the modified duration? Using the modified duration, what is the percentage...
a. What is the duration of a zero-coupon bond that has eight years to maturity? b....
a. What is the duration of a zero-coupon bond that has eight years to maturity? b. What is the duration if the maturity increases to 10 years? c. What is the duration if the maturity increases to 12 years? a. Duration of the bond b. Duration of the bond c. Duration of the bond years years years
a. What is the duration of a zero-coupon bond that has eight years to maturity? b. What is the duration if the maturity increases to 10 years? c. What is the duration if the maturity increases to 12 years? a. Duration of the bond b. Duration of the bond c. Duration of the bond years years years
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