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- A "discount bond" has a price less than face value because ________________. A) the issuing firm has a high probability of default B) the issuing firm has a low probability of default C) the bond coupon rate is greater than the yield to maturity D) the bond coupon rate is less than the yield to maturityThe coupon rate is less than the yield to maturity when the bond sells for less than par. Select one: True FalseWhat is a bond’s market value when the required rate of return (ie market rate) is less than the coupon rate? The bond’s market value is less than the par value. The bond’s market value is the same as the par value. The bond’s market value is greater than the par value. None of the above.
- Which of the following statements is false? A. Other things being equal, an increase in a bond’s maturity will increase its interest rate risk. B. Other things being equal, an increase in the coupon rate of a bond will decrease its interest rate risk. C. Other things being equal, an increase in a bond’s YTM will decrease its interest rate risk. D. Effective duration is calculated as Macaulay duration divided by one plus the bond’s yield to maturity.1)Which of the following is NOT true regarding bonds? Group of answer choices A)If a bond is selling at a discount, then the current yield is greater than the yield-to-maturity. B)An increase in market interest rates leads to a decrease in bond prices. C)If the coupon rate on a bond is lower than the yield-to-maturity, the bond sells at a discount. D)If the coupon rate on a bond equals the yield-to-maturity, then the bond sells at par. 2)When calculating free cash flows, which of the following statements is NOT true regarding the depreciation? Group of answer choices A)As an accrual, depreciation does not factor into free cash flow calculations. B)Depreciation is an accrual, not a cash flow. C)Depreciation create a tax shield. D)Depreciation is first removed and the subsequently added back in when calculating free cash flows.The coupon rate is greater than the yield to maturity when a bond sells at a premium. Select one: True False
- Under what situation might a bond discount arise when issuing bonds? Select one: a. The coupon rate is less than the effective or yield rate. b. The effective or yield rate is less than the coupon rate. c. The coupon rate is less than the cash rate of interest. d. The effective or yield rate is less than the market rate of interest.A bond will be priced at a discount to par value if its coupon rate is less than its yield-to-maturity (YTM). Select one: True FalseA bond with short maturity has less "interest rate risk" than a bond with long maturity when all other features—coupon interest rate, par value, and interest payment frequency—are the same. TRUE FALSE
- A zero coupon bond has more interest rate risk than a comparable coupon bond. true or falseIf a coupon-paying bond is selling at a discount, the bond's yield to maturity will be _______ than the bond's coupon interest rate. less equal moreThe coupon rate is calculated on the bond's face value (or par value), not on the issue price or market value. Choices: true or false