Explain how interest rates can be so influential in bond pricing. Explain what it means to , " ... trade at par, at prem...
Explain how interest rates can be so influential in bond pricing.
Explain what it means to , " ... trade at par, at premium, or at discount. " .
Homework Answers
If YTM of Bond is equal to coupon rate of Bond, bond will tradeat par,
If YTM of Bond is greater than Coupon rate then bond will trade at discount to par value,
If YTM of Bond is smaller than Coupon rate then bond will tradeat premium to par value
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Explain how interest rates can be so influential in bond pricing. Explain what it means to , " ... trade at par, at prem...
Explain how interest rates can be so influential in bond pricing "... which changes daily due...
Explain how interest rates can be so influential in bond pricing "... which changes daily due to changes in interest rate; "
Define coupon and market/effective interest rates as they determine bond pricing at par, premium, or discount...
Define coupon and market/effective interest rates as they determine bond pricing at par, premium, or discount values.
Define coupon and market/effective interest rates as they determine bond pricing at par, premium, or discount...
Define coupon and market/effective interest rates as they determine bond pricing at par, premium, or discount values.
Explain the effect of interest rates on bond pricing and how maturity length and higher and...
Explain the effect of interest rates on bond pricing and how maturity length and higher and lower coupon rates can affect bond prices when interests go up and down in the economy.
Question 5. Bond pricing (1 points) A municipal bond with a par value of $1,000 and...
Question 5. Bond pricing (1 points) A municipal bond with a par value of $1,000 and a maturity of 10 years has a coupon rate of 5% paid annually and the required rate of return for investors is only 4%. a) Calculate the bond value. b) Does the bond sell at par, premium, or discount? Explain why.
In a period of historically low interest rates, what bond would most likely be called? a....
In a period of historically low interest rates, what bond would most likely be called? a. bond selling at a discount to par b. bond with coupon rate less than yield to maturity c. bond selling at a premium to par d. zero coupon bond
Graph (show the cash flows) of the following bond: a. A $20,000 par value bond with...
Graph (show the cash flows) of the following bond: a. A $20,000 par value bond with a coupon of 4.0% paid semi-annually, maturing in 6 years. b. Find the current price of the Bond if you use 4.0% as the discount rate. c. Is this bond priced at a discount or a premium? Macaulay Duration: a. Calculate the price of a bond with a Face Value of $1,000, with an ANNUAL coupon of 10% (not paid semi-annually, but once a...
If you buy a callable bond and interest rates decline, will the value of your bond...
If you buy a callable bond and interest rates decline, will the value of your bond rise by as much as it would have risen if the bond had not been callable? Explain. Here is what I have so far: A callable bond is a bond that can be redeemed before its maturity date. This basically means that the issuer can call the bond at a predetermined call date if they chose to. If interest rates decline in the market,...
If interest rates did not change from now until this bond's maturity,a bond with a yield...
If interest rates did not change from now until this bond's maturity,a bond with a yield of 7% and a coupon rate of 8% would: Group of answer choices: A) it would not be trading at all since the coupon does not equal the yield in the market. B) trade at a discount right now. Its price would gradually increase until it reaches par at maturity. C) trade at par. D) trade at a premium right now. Its price would...
You own a bond that pays $ 80 in annual interest, with a $1000 par value....
You own a bond that pays $ 80 in annual interest, with a $1000 par value. It matures in 20 years. The market required yield to maturity on a comparable-risk bond is 10% Calculate value of the bond How does the value change if the yield to maturity on comparable-risk bond Increase 17% or Decrease to 6% Explain the implications of your answers in part b as they relate to interest rate risk, premium bonds, and discount bonds Assume that...
Question 5. Bond pricing (1 points) A municipal bond with a par value of $1,000 and a maturity of 10 years has a coupon rate of 5% paid annually and the required rate of return for investors is only 4%. a) Calculate the bond value. b) Does the bond sell at par, premium, or discount? Explain why.
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