A Treasury bond has an annual coupon of 8% and a 7.5 percent interest to maturity. Which of the comments below is the most accurate? a. The bond already has a yield of more than 8%. b. The bond is sold for more than its face value. c. If the yield to maturity is stable, the bond's price should decrease with time. d. Both b and c are valid statements. e. All of the above claims are true.
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A Treasury bond has an annual coupon of 8% and a 7.5 percent interest to maturity. Which of the comments below is the most accurate?
a. The bond already has a yield of more than 8%.
b. The bond is sold for more than its face value.
c. If the yield to maturity is stable, the
d. Both b and c are valid statements.
e. All of the above claims are true.
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- What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond? What would happen to the bond’s value if inflation fell and rd declined to 7%? Would we now have a premium or a discount bond? What would happen to the value of the 10-year bond over time if the required rate of return remained at 13%? If it remained at 7%? (Hint: With a financial calculator, enter PMT, I/YR, FV, and N, and then change N to see what happens to the PV as the bond approaches maturity.)Which of the following statements is CORRECT? a. If a coupon bond is selling at par, its yield to maturity is equal to zero. b. If a coupon bond is selling at a discount, its price will continue to increase until it reaches its par value at maturity. c. If interest rates increase, the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond. d. If a bond's yield to maturity exceeds its annual coupon, then the bond will trade at a discount. e. If a coupon bond, is selling at a premium, its yield to maturity is equal to zero. ANSWER IS NOT CA 10-year bond with a 9% annual coupon has an 8 percent yield to maturity. Which of the comments below is the most accurate?a. The bond is being sold at a reduced price.b. The current yield on the bond is greater than 9%.c. If the yield to maturity is stable, the bond's price would be lower one year from now than it is now.d. Both a and b are right statements.e. None of the above claims are true.
- You are considering two bonds. Bond A has a 9% annual coupon while Bond B has a 6% annual coupon. Both bonds have a 7% yield to maturity, and the YTM is expected to remain constant. Which of the following statements is CORRECT? State your reason for the answer. The price of Bond A will decrease over time, but the price of Bond B will increase over time. The price of Bond B will decrease over time, but the price of Bond A will increase over time. The prices of both bonds will remain unchanged. The prices of both bonds will increase by 7% per year. The prices of both bonds will increase by 9% per year.Which of the following statements is CORRECT? a. If a coupon bond is selling at par, its current yield equals its yield to maturity. b. If a coupon bond is selling at a discount, its price will continue to decline until it reaches its par value at maturity. c. If interest rates increase, the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond. d. If a bond's yield to maturity exceeds its annual coupon, then the bond will trade at a premium. e. If a coupon bond is selling at a premium, its current yield equals its yield to maturity.Bond A has a 9% annual coupon while Bond B has a 6% annual coupon. Both bonds have a 7% yield to maturity, and the YTM is expected to remain constant. Which of the following statements is CORRECT? a. The prices of both bonds will remain unchanged. b. The price of Bond A will decrease over time, but the price of Bond B will increase over time. c. The prices of both bonds will increase by 7% per year. d. The prices of both bonds will increase over time, but the price of Bond A will increase by more. e. The price of Bond B will decrease over time, but the price of Bond A will increase over time. Please explain and show work in excel
- Bond A has a 9% annual coupon, while Bond B has a 7% annual coupon. Both bonds have the same maturity, a face value of $1,000, an 8% yield to maturity, and are noncallable. Which of the following statements is CORRECT? a. If the yield to maturity for both bonds remains at 8%, Bond A's price one year from now will be higher than it is today, but Bond B's price one year from now will be lower than it is today. b. Bond A trades at a discount, whereas Bond B trades at a premium. c. Bond A's current yield is greater than that of Bond B. d. Bond A's capital gains yield is greater than Bond B's capital gains yield. e. If the yield to maturity for both bonds immediately decreases to 6%, Bond A's bond will have a larger percentage increase in value.you hold a bond with three years to maturity and a yield to maturity of 10% . If the maturity of the bond decreases to 8%, the duration rule predicts that the price of the bond will increase by 4.9736%. which of the following statement can be true a) The actual price increase is 4.8681% the actual price increase is 5.0235% b) The actual price increase is 5.0235% c) The bond is selling at par d) The bond is a zero-coupon bond e) None of these is possible.Consider a 10-year Treasury bond with a 12 percent annual coupon and a 15-year Treasury bond with an 8 percent annual coupon. The yield curve is smooth, at a 10-percent yield to maturity on all Treasury securities. Which argument is the most accurate?a. The 10-year bond is available at a bargain, while the 15-year bond is available at a premium.b. The 10-year bond is trading at a discount to par, while the 15-year bond is trading at par.c. As interest rates fall, all bonds' prices will rise, although the 15-year bond's price will increase by a greater percentage.d. If all bonds' yields to maturity stay at 10% for the next year, the 10-year bond's price would rise while the 15-year bond's price will decline.e. c and d are right statements.
- A security with higher risk will have a higher expected return. A bond’s risk level is reflected in its yield, but understanding the different risks involved when investing in bonds is important. The curves on the following graph show the prices of two 10% annual coupon bonds at various interest rates. Based on the graph, which of the following statements is true? Both bonds have equal interest rate risk. The 10-year bond has more interest rate risk. Neither bond has any interest rate risk. The 1-year bond has more interest rate risk. Frank Barlowe is retiring soon, so he’s concerned about his investments providing him with a steady income every year. He’s aware that if interest rates , the potential earnings power of the cash flow from his investments will increase. In particular, he is concerned that a decline in interest rates might lead to annual income from his investments. What kind of risk is Frank most concerned about protecting…Consider the following figure which shows the relationship between a three-year bond’s price (vertical axis) and the passage of time (measured in years - horizontal axis). Which of the following statements are consistent with the figure above? Group of answer choices A. This bond pays a coupon of $6. B. This pattern of prices is consistent with a bond whose yield to maturity is below the bond’s coupon rate. C. None of the other statements are correct. D. This bond pays coupons on a quarterly basis.If the pure expectations theory of the term structure is correct, which of the following statements would be CORRECT? a. If a 1-year Treasury bill has a yield to maturity of 7% and a 2-year Treasury bill has a yield to maturity of 8%, this would imply the market believes that 1-year rates will be 7.5% one year from now. b. The yield on a 5-year corporate bond should always exceed the yield on a 3-year Treasury bond. c. Interest rate (price) risk is higher on long-term bonds, but reinvestment rate risk is higher on short-term bonds. d. An upward-sloping yield curve would imply that interest rates are expected to be lower in the future. e. Interest rate (price) risk is higher on short-term bonds, but reinvestment rate risk is higher on long-term bonds
