an investment in a coupon bond will provide the investor with a return equal to the bond's yield to maturity at the time of purchase if:The bond is not called for redemption at a price that exceeds its par value
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an investment in a coupon bond will provide the investor with a return equal to the bond's yield to maturity at the time of purchase if:
The bond is not called for redemption at a price that exceeds its par value
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- The yield to maturity on a bond is A. below the coupon rate when the bond sells at a discount and equal to the coupon rate when the bond sells at a premium. B. the discount rate that will set the present value of the payments equal to the bond price. C. None of the options are correct. D. based on the assumption that any payments received are reinvested at the coupon rate.When would it make sense for a firm to call a bond issue? A) when the market price of the bond exceeds the call price, and market interest rates are greater than the bond's coupon rate B) when the market price of the bond exceeds the call price, and market interest rates are less than the bond's coupon rate C) when the market price of the bond is less than the call price, and market interest rates are greater than the bond's coupon rate D) when the market price of the bond is less than the call price, and market interest rates are less than the bond's coupon ratehow will the modified duretion of a floating coupon bond be compared to the modified duration of a fixed rate coupon bond? (same, higher or lower?) (floating coupon adjust coupon accotding to interest rate level, ie higher interest rate results in higher coupon payment)
- The yield to maturity on a bond a is fixed in the indenture. b is lower for higher-risk bonds. c is the required return on the bond. d is generally equal to the coupon interest rate.A bond has a market price that exceeds its face value. Which one of these features currently applies to this bond? Group of answer choices Yield to maturity greater than coupon rate. Currently selling at par. Yield to maturity less than the coupon rate. Yield to maturity equal to the coupon. Discount bond.Coupon payments are fixed, but the percentage return that investors receive varies based on market conditions. This percentage return is referred to as the bond’s yield. Yield to maturity (YTM) is the rate of return expected from a bond held until its maturity date. However, the YTM equals the expected rate of return under certain assumptions. Which of the following is one of those assumptions? The bond has an early redemption feature. The bond will not be called.
- If 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 moreIf the bondholder’s required rate of return equals the coupon interest rate, the bond will sell at _______________. A premium bond sells for ____________ as maturity approaches. The discount bond sells for ____________ as maturity approaches.Which of the following statements correctly describes the relationship between a long-term bond’s market value, its coupon rate and the relevant yield to maturity? A. When bonds are initially issued, the coupon rate is generally set equal to the required yield to maturity so that the company can issue the bonds at their face value. B. If at any point in the bond’s life its coupon rate is less than the market determined yield to maturity, its market value at that time will be less than the face value of the bond. C. More than one of the other statements are correct D. A government bond with a fixed coupon rate may be valued below its’ face value even though the promised cash flows are effectively riskless. E. None of the other statements are correct Is "B" is the correct answer?
- Which of the following statements about the Macaulay duration of a coupon bond is true? Select one alternative: a.. The duration does not change after the bond is issued. b. The duration will decrease as the yield to maturity decreases. c. None of the other statements is true. d. The duration can precisely predict the price change of the bond for any interest rate change.Which of the following bonds has the least reinvestment risk?A. A bond that has a higher coupon rate than the yield-to-maturityB. A bond that has a lower coupon rate than the yield-to-maturityC. A zero-coupon bondThe process of bond valuation is based on the fundamental concept that the current price of a security can be determined by calculating the present value of the cash flows that the security will generate in the future. There is a consistent and predictable relationship between a bond’s coupon rate, its par value, a bondholder’s required return, and the bond’s resulting intrinsic value. Trading at a discount, trading at a premium, and trading at par refer to particular relationships between a bond’s intrinsic value and its par value. This also results from the relationship between a bond’s coupon rate and a bondholder’s required rate of return. Remember, a bond’s coupon rate partially determines the interest-based return that a bond Q1____pay, and a bondholder’s required return reflects the return that a bondholder Q2._______to receive from a given investment. The mathematics of bond valuation imply a predictable relationship between the bond’s coupon rate, the bondholder’s…
