The coupon rate on a bond typically adjusts as the state of the economy changes. True...
The coupon rate on a bond typically adjusts as the state of the economy changes.
True or False?
Homework Answers
When the state of the economy changes, there is a change in the price of the bond. There is no change in coupon rates. If the state of the economy is good, the interest rates increase and the price of the bond falls to match the interest rates with the YTM. Vice versa is true when the economy falls. Hence, the coupon rate on a bond typically does not adjust as the state of the economy changes.
Answer - False
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The coupon rate on a bond typically adjusts as the state of the
economy changes.
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true or false: the coupon rate on a bond measures the investors return on their investment.
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when the coupon rate on a standard coupon bond increases,the duration of the bond increase?True or False.explain?
Zero-coupon bonds typically provide Zero interest True False
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4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments...
4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount b) Calculate the price of this bond. c Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what...
4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments...
4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount. b) Calculate the price of this bond. c) Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what...
5) For each of the following state whether it is True or False and provide a...
5) For each of the following state whether it is True or False and provide a brief explanation (1 or 2 sentences) as to why it is true or false. a)All else the same, a higher coupon rate will mean a higher price for a standard coupon bond. All else the same, a higher coupon rate will mean a higher duration for a standard coupon bond All else the same, a shortage in the money market will lead to the...
For each of the following state whether it is True or False and provide a brief...
For each of the following state whether it is True or False and provide a brief explanation (1 or 2 sentences) as to why it is true or false. a) All else the same, a higher coupon rate will mean a higher price for a standard coupon bond. b) All else the same, a higher coupon rate will mean a higher duration for a standard coupon bond. c) All else the same, a shortage in the money market will lead...
5) For each of the following state whether it is True or False and provide a...
5) For each of the following state whether it is True or False and provide a brief explanation (1 or 2 sentences) as to why it is true or false. a) All else the same, a higher coupon rate will mean a higher price for a standard coupon bond. b) All else the same, a higher coupon rate will mean a higher duration for a standard coupon bond. c) All else the same, a shortage in the money market will...
6. A floating rate bond A. Typically pays interest that varies periodically with changes in some...
6. A floating rate bond A. Typically pays interest that varies periodically with changes in some specified market interest rate like the yield to maturity on 1-year Treasury bonds B. Typically floats with the dollar against other currencies C. Will always have higher returns required by investors than fixed-rate bonds D. Always has a market price that floats with the stock market E. Typically has a put feature that enables investors to buy it at a floating price 7. A...
25. If the rate of economic growth in the economy increases, investors will typically demand a...
25. If the rate of economic growth in the economy increases, investors will typically demand a higher bond yield when purchas ing T-bonds. Explain how economic growth, the demand for loanable funds in the economy, and bond yields demanded by investors are linked.
4) Suppose there is a 3-year bond with a $1000 face value, 30% annual coupon payments and a 20% annual yield to maturity. a) Without any calculation, briefly explain whether this bond will be selling a premium or a discount b) Calculate the price of this bond. c Calculate the duration of this bond. d) Suppose the interest rates in the economy rise by 5 percentage points immediately after someone bought this bond. Show a calculation using duration for what...
5) For each of the following state whether it is True or False and provide a brief explanation (1 or 2 sentences) as to why it is true or false. a)All else the same, a higher coupon rate will mean a higher price for a standard coupon bond. All else the same, a higher coupon rate will mean a higher duration for a standard coupon bond All else the same, a shortage in the money market will lead to the...
25. If the rate of economic growth in the economy increases, investors will typically demand a higher bond yield when purchas ing T-bonds. Explain how economic growth, the demand for loanable funds in the economy, and bond yields demanded by investors are linked.
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