Homework Answers
8)
Current yield = Coupon payment/Price
If bond price is more than the par value, current yield will be less than the coupon rate and vice-versa.
Hence, correct option is B.
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coupon bond that has a culle coupon bond that he Which of the following statement is...
9) How much interest will be earned in an account into which 1.000 is deposited for...
9) How much interest will be earned in an account into which 1.000 is deposited for once year with continuous compounding at a 13% rate? A) $169.00 B) $130.00 C) $353.34 D) $138.83 10) An interest rate that has been annualized using compound interest is termed the: A) discounted interest rate. B) annual percentage rate. C) effective annual interest rate. D) discount factor. 11) What causes bonds to sell for a premium? A) Speculative-grade ratings B) Investment-quality ratings C) Long...
9.Which of the following statements is FALSE? A. Most coupon bond issuers choose a coupon rate...
9.Which of the following statements is FALSE? A. Most coupon bond issuers choose a coupon rate so that the bonds will initially trade at, or very near to, par. B. If the bond trades at a discount, and investor who buys the bond will earn a return both from receiving the coupons and from receiving a face value that exceeds the price paid for the bond. C. At any point in time, changes in market interest rates affect a bond's...
4.Which one of the following statements about the approach to bond pricing is NOT true? Select...
4.Which one of the following statements about the approach to bond pricing is NOT true? Select one: A. To calculate a bond's price, one needs to calculate the present value of the bond's expected cash flows. B. The value, or price, of any asset is the future value of its cash flows. 6.Which one of the following statements is NOT true? Select one: A. The yield to maturity of a bond is the discount rate that makes the present value...
6. Suppose that you purchase a 2 year coupon bond at the time it is issued...
6. Suppose that you purchase a 2 year coupon bond at the time it is issued for $1100. The face value of the bond is $1000, with annual coupon payments of $80. a. What is the bond's "coupon rate"? b. What is the bond's "current yield"? C. What is the bond's (nominal) "yield to maturity"? d. If you hold the bond for 1 year and sell it for $1035 (after collecting the first coupon payment), what is your "holding period...
A 20 year, 8% semi-annual coupon bond with a par value of $1,000 may be called...
A 20 year, 8% semi-annual coupon bond with a
par value of $1,000 may be called in 10
years at a call price of $1,100. The bond sells for
$1,200.
e. How would the price of
the bond be affected by a change in the going market interest
rates?
Please show work ( by adding numbers or CELL with
formula if needed). Thank you, will rate.
L M N I e a A 20 year, 8% semi-annual coupon bond with...
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6.3%. You hold...
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6.3%. You hold the bond for five years before selling it a. If the bond's yield to maturity is 6.3% when you sell it, what is the annualized rate of return of your investment? b. If the bond's yield to maturity is 7.3% when you sell it, what is the annualized rate of return of your investment? c. If the bond's yield to maturity is 5.3% when...
Question 27 1 pts A 12-year bond has an annual coupon of 9%. The coupon rate...
Question 27 1 pts A 12-year bond has an annual coupon of 9%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 7%. Which of the following statements is CORRECT? O If market interest rates decline, the price of the bond will O The bond is currently selling at a price below its par O If market interest rates remain unchanged, the bond's also decline. value. price one year from now...
Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With...
Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With a face value of $1,000, a final maturity of 15 years and a current market interest rate (YTM) of 3.65%, he is computing the fair price that he should pay today. If he assumes semi-annual compounding, the price of the bond should be $ (Select) 4. If the market interest rate (YTM) does not change, the value of the bond will [Select] > Gary...
1) Bond with a $1.000 par value has an 8 percent annual coupon rate. It will...
1) Bond with a $1.000 par value has an 8 percent annual coupon rate. It will mature in 4 years, and annual coupon payments are made at the end of each year. Present annual yields on similar bonds are 6 percent. What should be the current price? - a. S1.069.31 b. S1.000.00 c. $9712 d. $927.66 e. none of the above 2) A bond with a ten percent coupon rate bond pays interest semi-annually. Par value is $1.000. The bond...
Bond Valuation Time to Maturity (Years) Coupon Rate Required Return Frequency Bond Valuations This bond has...
Bond Valuation Time to Maturity (Years) Coupon Rate Required Return Frequency Bond Valuations This bond has 20 years to maturity Coupon rate Current required return 9.00 % Semi Annual interest payments 8.00% Face Value Value cach year $1,000.00 Par value 20 Find the value of this bond for each of the 18 years to maturity listed 16 14 Why does the value of the bond continue to increase over time? 12 10 Is this bond currently selling for a premium...
9) How much interest will be earned in an account into which 1.000 is deposited for once year with continuous compounding at a 13% rate? A) $169.00 B) $130.00 C) $353.34 D) $138.83 10) An interest rate that has been annualized using compound interest is termed the: A) discounted interest rate. B) annual percentage rate. C) effective annual interest rate. D) discount factor. 11) What causes bonds to sell for a premium? A) Speculative-grade ratings B) Investment-quality ratings C) Long...
6. Suppose that you purchase a 2 year coupon bond at the time it is issued for $1100. The face value of the bond is $1000, with annual coupon payments of $80. a. What is the bond's "coupon rate"? b. What is the bond's "current yield"? C. What is the bond's (nominal) "yield to maturity"? d. If you hold the bond for 1 year and sell it for $1035 (after collecting the first coupon payment), what is your "holding period...
A 20 year, 8% semi-annual coupon bond with a
par value of $1,000 may be called in 10
years at a call price of $1,100. The bond sells for
$1,200.
e. How would the price of
the bond be affected by a change in the going market interest
rates?
Please show work ( by adding numbers or CELL with
formula if needed). Thank you, will rate.
L M N I e a A 20 year, 8% semi-annual coupon bond with...
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6.3%. You hold the bond for five years before selling it a. If the bond's yield to maturity is 6.3% when you sell it, what is the annualized rate of return of your investment? b. If the bond's yield to maturity is 7.3% when you sell it, what is the annualized rate of return of your investment? c. If the bond's yield to maturity is 5.3% when...
Question 27 1 pts A 12-year bond has an annual coupon of 9%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 7%. Which of the following statements is CORRECT? O If market interest rates decline, the price of the bond will O The bond is currently selling at a price below its par O If market interest rates remain unchanged, the bond's also decline. value. price one year from now...
Gary Jones has identified a zero coupon bond for investment in one of his portfolios. With a face value of $1,000, a final maturity of 15 years and a current market interest rate (YTM) of 3.65%, he is computing the fair price that he should pay today. If he assumes semi-annual compounding, the price of the bond should be $ (Select) 4. If the market interest rate (YTM) does not change, the value of the bond will [Select] > Gary...
1) Bond with a $1.000 par value has an 8 percent annual coupon rate. It will mature in 4 years, and annual coupon payments are made at the end of each year. Present annual yields on similar bonds are 6 percent. What should be the current price? - a. S1.069.31 b. S1.000.00 c. $9712 d. $927.66 e. none of the above 2) A bond with a ten percent coupon rate bond pays interest semi-annually. Par value is $1.000. The bond...
Bond Valuation Time to Maturity (Years) Coupon Rate Required Return Frequency Bond Valuations This bond has 20 years to maturity Coupon rate Current required return 9.00 % Semi Annual interest payments 8.00% Face Value Value cach year $1,000.00 Par value 20 Find the value of this bond for each of the 18 years to maturity listed 16 14 Why does the value of the bond continue to increase over time? 12 10 Is this bond currently selling for a premium...
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