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SLdtus QUESTION 1 Because short-ter m interest rates are much more volatile than long-term rates, you...
When interest rates shift, the price of zero coupon bonds are volatile Multiple Choice more; if...
When interest rates shift, the price of zero coupon bonds are volatile Multiple Choice more; if they have a short maturity rather than a long maturity not; because their duration always matches their maturity equally; regardless of their maturity. less; than coupon bonds of the same maturity. more; than coupon bonds of the same maturity. What is the duration of a bond with four years to maturity and a coupon of 9.5 percent paid annuallyif the bond sells at par?...
QUESTION 4 IBM's bonds currently sell for $1,040 and have a par value of $1,000. They...
QUESTION 4 IBM's bonds currently sell for $1,040 and have a par value of $1,000. They pay $65 annual coupon and have a 15 year maturity, but may be called in 5 years at $1,000. What is their Yield to Maturity (YTM)? 5.78% 6.39% 6.71% 6.09% QUESTION 5 Bob's corporation's bonds make an annual payment of 7.35%. The bonds have a par value of $1,000, a current price of $1,130, and mature in 12 years. What is the yield to...
QUESTION 1 If firms decide to raise more funds through the sale of bonds, interest rates...
QUESTION 1 If firms decide to raise more funds through the sale of bonds, interest rates will rise. True False 1 points QUESTION 2 If the price of bonds is higher than the market equilibrium then their price will fall and interest rates will fall as well. True False 1 points QUESTION 3 As explained in the text, assets may be financial or non-financial. True False 1 points QUESTION 4 In deciding what assets to hold, people...
drop down option the same for all questions Which tend to be more volatile, short- or...
drop down option the same for all questions
Which tend to be more volatile, short- or long-term interest rates? Long-term interest rates Short-term interest rates If the inflation rate was 2.60% and the nominal interest rate was 6.00% over the last year, what was the real rate of interest over the last year? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. O 3.40% 3.91% 2.89% 4.25% Component Symbol Characteristic This is the rate for a...
1. 1 in Nation is expected to be relatively low, then Interest rates will tend to...
1. 1 in Nation is expected to be relatively low, then Interest rates will tend to be relatively high, other things held constant 2. True b. False 2. Which of the following statements is CORRECT? 2. If the maturity risk premium (MRP) is greater than rero, the Treasury bond yield curve must be upward sloping b. If the maturity risk premium (MRP) equals zero, the Treasury bond yield curve must be flat. c. If inflation is expected to decrease in...
Questions 1 to 10 are false statements. Please re-write each statement so that it is true....
Questions 1 to 10 are false statements. Please re-write each statement so that it is true. It may be as simple as one word change or more complex. 1. A callable bond is one in which the issuer is required to retire a certain amount of the outstanding bonds each year to ensure that all the bond principle is paid by final maturity. 2. There is no default risk with either Treasury bonds or municipal bonds. 3. The dirty price...
1a) You just learned from your sister that you can buy a $1,000 par value bond...
1a) You just learned from your sister that you can buy a $1,000 par value bond for $800. The coupon rate is ten percent (paid annually), and there are ten years left until the bond matures. You should purchase the bond if your require twelve percent return on bonds with this similar risk level. True/False? 1b) A corporate bond with ten years to maturity has an annual coupon rate of six percent. The bond today is selling for $1,000. With...
Question 1 -- /2 On January 1, 2020, Rainbow Corporation acquired as long-term investment $600,000 of...
Question 1 -- /2 On January 1, 2020, Rainbow Corporation acquired as long-term investment $600,000 of 8% bonds, dated January 1. Company is holding the bonds in its trading portfolio. The market interest rate (yield) was 9% for bonds of similar risk and maturity. Wolf paid $560,975 for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2020, was...
3.2% 2.5% 0/1 pt Question 32 Assume that the current interest rate on a one-year bond...
3.2% 2.5% 0/1 pt Question 32 Assume that the current interest rate on a one-year bond is 8 percent, the current rate on a two-year bond is 10 percent, and the current rate on a three-year bond is 12 percent. If the expectations theory of the term structure is correct, what is the one-year interest rate expected during Year 3? (Base your answer on an arithmetic average rather than a geometri average.) 12% 16% 13% Incorrect. The yield on any...
SECTION B Answer question 2 and not more than one further question from this section 2...
SECTION B Answer question 2 and not more than one further question from this section 2 The following is the trial balance of Twist Ltd. at 31 December 2012 100,000 30,000 150,000 13,000 75,000 12,650 6,600 1.250 860 5.948 656 Authorised, issued and called-up capital 100.000 equity shares of El cach 60,000 7% redeemable preference shares of 50p each Freehold buildings: cost Freehold buildings: accumulated depreciation Plant and machinery cost Plant and machinery accumulated depreciation Development costs (cost £10,000) Interim...
When interest rates shift, the price of zero coupon bonds are volatile Multiple Choice more; if they have a short maturity rather than a long maturity not; because their duration always matches their maturity equally; regardless of their maturity. less; than coupon bonds of the same maturity. more; than coupon bonds of the same maturity. What is the duration of a bond with four years to maturity and a coupon of 9.5 percent paid annuallyif the bond sells at par?...
drop down option the same for all questions
Which tend to be more volatile, short- or long-term interest rates? Long-term interest rates Short-term interest rates If the inflation rate was 2.60% and the nominal interest rate was 6.00% over the last year, what was the real rate of interest over the last year? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. O 3.40% 3.91% 2.89% 4.25% Component Symbol Characteristic This is the rate for a...
1. 1 in Nation is expected to be relatively low, then Interest rates will tend to be relatively high, other things held constant 2. True b. False 2. Which of the following statements is CORRECT? 2. If the maturity risk premium (MRP) is greater than rero, the Treasury bond yield curve must be upward sloping b. If the maturity risk premium (MRP) equals zero, the Treasury bond yield curve must be flat. c. If inflation is expected to decrease in...
Question 1 -- /2 On January 1, 2020, Rainbow Corporation acquired as long-term investment $600,000 of 8% bonds, dated January 1. Company is holding the bonds in its trading portfolio. The market interest rate (yield) was 9% for bonds of similar risk and maturity. Wolf paid $560,975 for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2020, was...
3.2% 2.5% 0/1 pt Question 32 Assume that the current interest rate on a one-year bond is 8 percent, the current rate on a two-year bond is 10 percent, and the current rate on a three-year bond is 12 percent. If the expectations theory of the term structure is correct, what is the one-year interest rate expected during Year 3? (Base your answer on an arithmetic average rather than a geometri average.) 12% 16% 13% Incorrect. The yield on any...
SECTION B Answer question 2 and not more than one further question from this section 2 The following is the trial balance of Twist Ltd. at 31 December 2012 100,000 30,000 150,000 13,000 75,000 12,650 6,600 1.250 860 5.948 656 Authorised, issued and called-up capital 100.000 equity shares of El cach 60,000 7% redeemable preference shares of 50p each Freehold buildings: cost Freehold buildings: accumulated depreciation Plant and machinery cost Plant and machinery accumulated depreciation Development costs (cost £10,000) Interim...
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