Explain why some bonds sell for a premium while others sell for discount?
Explain why some bonds sell for a premium while others sell for discount?
Homework Answers
The price of bond is related to expected interest rate on bond. Expected interest rate (YTM) is the interest rate expected by bondholders on the bonds issued by company. When expected return on bond (YTM) is higher than coupon rate, bonds sell at discount as bondholders expect higher return on investment. When expected return on bond (YTM) is lower than coupon rate, bonds sell at premium. Premium on bond arises when the price of bond is higher than its par value. Discount on bond arises when the price of bond is lower than its par value.
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Explain why some bonds sell for a premium while others sell for discount?
Why would bonds ever sell at a premium? Stated Rate = Market Rate Stated Rate >...
Why would bonds ever sell at a premium? Stated Rate = Market Rate Stated Rate > Market Rate Stated Rate < Market Rate QUESTION 2 Why would bonds ever sell at a discount? Stated Rate = Market Rate Stated Rate > Market Rate Stated Rate < Market Rate QUESTION 3 At what amount do bonds sell for if the Stated Rate is equal to the Market Rate? QUESTION 4 $500,000, 10%, 20 year bonds sell at 102.These bonds are selling...
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Identify/explain the relationship between coupon rate and yield to maturity for: Discount Bonds Premium Bonds Par Val...
Identify/explain the relationship between coupon rate and yield to maturity for: Discount Bonds Premium Bonds Par Value Bonds
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The discount on bonds payable or premium on bonds payable is shown on the balance sheet...
The discount on bonds payable or premium on bonds payable is
shown on the balance sheet as an adjustment to bonds payable to
arrive at the carrying value of the bonds. Indicate the appropriate
addition or subtraction to bonds payable:
Premium on
Bonds Payable
Discount on
Bonds Payable
Add
Deduct
Deduct
Deduct
Add
Add
Deduct
Add
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Explain why some investors prefer getting dividends and why others prefer getting capital gain!
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Use the intertemporal trade model to show why some countries might benefit from borrowing while others...
Use the intertemporal trade model to show why some countries might benefit from borrowing while others might benefit from lending
The discount on bonds payable or premium on bonds payable is
shown on the balance sheet as an adjustment to bonds payable to
arrive at the carrying value of the bonds. Indicate the appropriate
addition or subtraction to bonds payable:
Premium on
Bonds Payable
Discount on
Bonds Payable
Add
Deduct
Deduct
Deduct
Add
Add
Deduct
Add
Explain why some investors prefer getting dividends and why others prefer getting capital gain!
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