Homework Answers
Callable bonds meaning:
It is long term fixed rate Bond where the issuer enjoys a call
option that is right to buy back the bonds from the investors prior
to maturity at a predetermined price known as call price. the call
price is usually at a premium to face value.
The issuer will obviously call the bonds (that is refund prior to maturity) if the interest rate falls, such that issuer can refund the old bonds and issue new bonds at a lower interest rate.
The one callable at 105 will sell at a higher price at it has a high call risk.
Answer:
The bond callable at 105.
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Two bonds have identical times to maturity and coupon rates. One is callable at 105, the...
Question 11 (1 point) Two bonds have identical times to maturity and coupon rates. One is...
Question 11 (1 point) Two bonds have identical times to maturity and coupon rates. One is callable at 102, the other bond is callable at 101(101% and 102% of par, of course). Which bond should have the higher yield to maturity (ytm)? 1) the bond that is callable at 102 will have the higher ytm 2) the bond that is callable at 101 will have the higher ytm 3) it is impossible to determine from the information provided 4) both...
Suppose that Verizon issues two bonds with identical coupon rates and maturity dates. One bond is...
Suppose that Verizon issues two bonds with identical coupon rates and maturity dates. One bond is callable, however, while the other is not Which bond will sell at a higher price? not enough information the non-callable bond the callable bond
A firm issues two bonds with 20-year maturities. Both are callable at $1,050. The first bond...
A firm issues two bonds with 20-year maturities. Both are callable at $1,050. The first bond is issued at a deep discount to par with a coupon rate of 4% and a price of $580 to yield 8.4%. The second is issued at par with a coupon rate of 8.9%. What is the yield-to-maturity of the par bond? If you expect rates to fall substantially in the next 2 years, which bond would you prefer to hold? In what sense...
A zero-coupon bond with face value $1,000 and maturity of 3 years sells for $939.6. What...
A zero-coupon bond with face value $1,000 and maturity of 3 years sells for $939.6. What is its yield to maturity? Enter your answer as a decimal, rounded to four decimal places. Your Answer: Answer uestion 11 (1 point) Two bonds have identical times to maturity and coupon rates. One is callable at 105, the other at 110. Which bond should be priced higher? Callable at 105 Callable at 110
10. A callable corporate bond can be purchased by the bond issuer before maturity for a...
10. A callable corporate bond can be purchased by the bond issuer before maturity for a price specified at the time the bond is issued. Corporation X issues two bonds (bond A and bond B) at the same time with the same maturity, par value, and coupons. However, bond A is callable and bond B is not. Which bond will sell for a higher price and why? (a) Bond B; bond A should have the value of bond B minus...
Question 8 Aspen Company's non-callable bonds currently sell for $900. They have a 15-year maturity, an...
Question 8 Aspen Company's non-callable bonds currently sell for $900. They have a 15-year maturity, an annual coupon of $70, and a par value of $1,000. What is their yield to maturity? Your answer should be between 6.65 and 8.80, rounded to 2 decimal places, with no special characters. Question 9 Micron Technology's bonds currently sell for $1.210 and have a par value of $1,000. They pa 105 annual coupon and have a 15-year maturity, but they can be called...
If two bonds with different coupon rates have the same maturity, which one will fluctuate more...
If two bonds with different coupon rates have the same maturity, which one will fluctuate more as interest rates change? Explain./
Problem 3. Consider two bonds that have the same coupon, time to maturity and price. One...
Problem 3. Consider two bonds that have the same coupon, time to maturity and price. One is a B-rated corporate bond. The other is a CAT bond. An analysis based on historical data shows that the expected losses on the two bonds in each year of their life is the same. Which bond would you advise a portfolio manager to buy and why?
Kebt Corporation's Class Semi bonds have a 12-year maturity and an 8.50% coupon paid semiannually (4.25%...
Kebt Corporation's Class Semi bonds have a 12-year maturity and an 8.50% coupon paid semiannually (4.25% each 6 months), and those bonds sell at their $1,000 par value. The firm's Class Ann bonds have the same risk, maturity, nominal interest rate, and par value, but these bonds pay interest annually. Neither bond is callable. At what price should the annual payment bond sell?
McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, and a 12% coupon...
McCurdy Co.'s Class Q bonds have a 12-year maturity, $1,000 par value, and a 12% coupon paid semiannually (6% each 6 months), and those bonds sell at their par value. McCurdy's Class P bonds have the same risk, maturity, and par value, but the p bonds pay a 12% annualcoupon. Neither bond is callable. At what price should the annual payment bond sell?
Question 11 (1 point) Two bonds have identical times to maturity and coupon rates. One is callable at 102, the other bond is callable at 101(101% and 102% of par, of course). Which bond should have the higher yield to maturity (ytm)? 1) the bond that is callable at 102 will have the higher ytm 2) the bond that is callable at 101 will have the higher ytm 3) it is impossible to determine from the information provided 4) both...
Suppose that Verizon issues two bonds with identical coupon rates and maturity dates. One bond is callable, however, while the other is not Which bond will sell at a higher price? not enough information the non-callable bond the callable bond
A zero-coupon bond with face value $1,000 and maturity of 3 years sells for $939.6. What is its yield to maturity? Enter your answer as a decimal, rounded to four decimal places. Your Answer: Answer uestion 11 (1 point) Two bonds have identical times to maturity and coupon rates. One is callable at 105, the other at 110. Which bond should be priced higher? Callable at 105 Callable at 110
10. A callable corporate bond can be purchased by the bond issuer before maturity for a price specified at the time the bond is issued. Corporation X issues two bonds (bond A and bond B) at the same time with the same maturity, par value, and coupons. However, bond A is callable and bond B is not. Which bond will sell for a higher price and why? (a) Bond B; bond A should have the value of bond B minus...
Question 8 Aspen Company's non-callable bonds currently sell for $900. They have a 15-year maturity, an annual coupon of $70, and a par value of $1,000. What is their yield to maturity? Your answer should be between 6.65 and 8.80, rounded to 2 decimal places, with no special characters. Question 9 Micron Technology's bonds currently sell for $1.210 and have a par value of $1,000. They pa 105 annual coupon and have a 15-year maturity, but they can be called...
If two bonds with different coupon rates have the same maturity, which one will fluctuate more as interest rates change? Explain./
Problem 3. Consider two bonds that have the same coupon, time to maturity and price. One is a B-rated corporate bond. The other is a CAT bond. An analysis based on historical data shows that the expected losses on the two bonds in each year of their life is the same. Which bond would you advise a portfolio manager to buy and why?
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