Question

You just purchased 10 year corporate and that has an annual coupon The band sell or a premium above par. Which of the following statements correct? a. The bond's yield to maturity is less than 10 percent. . The band's current yield is greater than 10 percent or the bond's yield to maturity stays constant, the bond's price will be the same on year from now d. Statements a and care correct. e. None of the answers above is correct. 2. Which of the following statements is most correct? a. The market value of a bond will always approach its par value as its maturity date approaches, provided the issuer of the bond does not go bankrupt. b. If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices. c. The total yield on a bond is derived from interest payments and changes in the price of the bond. d. Statements a and c are correct. c. All of the statements above are correct. 3. Which of the following statements is most correct? a. Assume that the required rate of return on a given stock is 13 percent. If the stock's dividend is growing ar a constant rate of 5 percent. its expected dividend yield is 5 percent as well. b. The dividend yield on a stock is equal to the expected return less the expected capital gain. c. A stock's dividend yield can never exceed the expected growth rate. d. All of the answers above are correct. e. Answers b and c are correct.

Answer 1

1. Option a is correct option .Because in Premium bonds YTM is less than coupon rate
Option b is false because current yield is lower than coupon rate in premium bond.
Option c is false because after one year due to reduction in maturity price will change.


2. Option d is correct , statements a and c are correct .

Option b is false because when inflation increases. YTM increases and this reduces the price of bond.