Ans- Option 4, 3-year and 6% coupon
The lower the no of years to maturity the lower the Interest rate risk as in less period there will be less probability of Interest rate change. While Zero Coupon Bond carry higher Interest rate risk than the Non-Xero coupon Bond.
Thus, 6% Coupon with 3-year carry least Interest rate risk
Which one of the following bonds has the least interest rate risk? 1) 3-year, 0 percent...
1. Which one of the following bonds is the least sensitive to interest rate risk? A. 1-year; 4 percent coupon B. 1-year; 6 percent coupon C. 5-year; 6 percent coupon D. 7-year; 6 percent coupon E. 7-year; 4 percent coupon 2. The bonds issued by Stainless Tubs bear an 12 percent coupon, payable semiannually. The bonds mature in 15 years and have a $1,000 face value. Currently, the bonds sell for $900. What is the vield to maturity? A. 6.36...
Which one of the following bonds is the least sensitive to interest rate risk? Multiple Choice a. 3-year; 4 percent coupon b. 3-year; 6 percent coupon c. 5-year; 6 percent coupon d. 7-year; 6 percent coupon e. 7-year; 4 percent coupon New Homes has a bond issue with a coupon rate of 5.5 percent that matures in 8.5 years. The bonds have a par value of $1,000 and a market price of $1,022. Interest is paid semiannually. What is the...
Question 31 (1 point) Which one of the following bonds has the greatest interest rate risk? O A) 7-year; 7 percent coupon B) 9-year; 7 percent coupon OC) 5-year; 5 percent coupon D) 9-year; 9 percent coupon E) 5-year; 9 percent coupon
Which of the following bonds will have the greatest degree of interest-rate risk? A. A 10-year, 6% semi-annual coupon with a yield of 6% B. A 10-year 5% semi-annual coupon with a yield of 6% C. An 8-year, 6% semi-annual coupon with a yield of 6% D. An 8-year, 5% semi-annual coupon with a yield of 6%
Which one of the following is true? Interest Rate Risk is the risk that arises for bond owners from fluctuating interest rates. All other things being equal, the higher the coupon rate, the greater the interest rate risk. Interest Rate Risk is the risk that arises for bond owners from fluctuating interest rates. All other things being equal, the shorter the time to maturity, the lower the interest rate risk. O When comparing a 20-year bond versus a 1-year bond,...
1. Which of the following bonds has the lowest interest rate risk? A. 3-year 5% corporate bond. B. 30-year 5% corporate bond. C. 30-year zero-coupon corporate bond. 2. If the effective duration of a callable bond is 5 and the negative convexity adjustment is 1%. If yield were to fall by 100 basis point, the duration combined with convexity would: A. Produce a price change of 5% B. Produce a price change of less than 5%. C. Produce a price...
Of these choices, a risk-adverse investor who prefers to minimize interest rate risk is most apt to invest in: 3-year, zero coupon bonds. 5-year, 7 percent coupon bonds. 20-year, 6 percent coupon bonds. 20-year, zero coupon bonds. 2-year, 7 percent coupon bonds.
12. Price risk and reinvestment rate risk Aa Aa Which of the following statements are true? Check all that apply. Bonds with similar coupons will always have the same percentage price change, no matter the maturity. Rising interest rates cause the value of outstanding bonds to decrease A decline in interest rates will lead to a decline in the price of an outstanding bond To minimize interest rate risk, an investor should buy long-term bonds. Which of the following bonds...
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Based on your answers in (a) through (e) which project will you finally choose? Why Question 3 PJ Morgan issued 10-year bonds at a coupon rate of 10 percent. The bonds make quarterly payments. The yield-to- maturity on these bonds is also 13 percent. What is the current bond price? Discuss the three caveats as it relates interest rates and coupon rates What is yield to maturity? Question 4 JB Company can do the following projects, however they...
11. The interest rate on one-year risk-free bonds is 4.25 percent in the United States and 3.75 percent in Switzerland. The current exchange rate is $0.65 per Swiss frand. Suppose that you are a U.S, investor and you expect the Swiss franc to appreciate 2.75 percent over the next year. a. Calculate the foreign currency risk premium. b. Calculate the domestic currency return on the foreign bond, assuming that your cur- rency appreciation expectations are met