An investor invests in a fixed-rate bond because: His calculated value for the bond is greater than the selling price His calculated yield is greater than the yield posted in the market He is happy with the yield of the bond when considering its risk None of the above
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- An investor invests in a fixed-rate bond because:
- His calculated
value for the bond is greater than the selling price - His calculated yield is greater than the yield posted in the market
- He is happy with the yield of the bond when considering its risk
- None of the above
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- Risk free rate can be derived from a triple A rated commercial bonds and the estimated price of options is dependent on the expected return of an investor. true or false?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 rateSorry this is a long question, this is all part of this question... The 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 (might/will) pay, and a bondholder’s required return reflects the return that a bondholder (Is obligated/Would like) to receive from a given investment. The mathematics of…
- Suppose a mutual fund that invests in bonds purchased a bond when its yield to maturity is higher than the coupon rate. The investor should expect the bond’s price to: exceed the face value at maturity. decline over time, reaching par value at maturity. increase over time, reaching par value at maturity. be less than the face value at maturity.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 valueWhich of the following statement on bond valuation is correct? A. If bond price is greater than bond face value, the bond is mispriced and no investor will be interested in the bond. B. If YTM is greater than coupon rate, the bond price is greater than the bond face value. C. If the coupon rate is greater than the YTM, the bond price is less than the bond face value. D. If the coupon rate is less than the YTM, the bond price is less than the bond face value.
- The 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…The 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. (1) Remember, a bond’s coupon rate partially determines the interest-based return that a bond ________ pay, and a bondholder’s required return reflects the return that a bondholder (2) ___________to receive from a given investment. The mathematics of bond valuation imply a predictable relationship between the bond’s coupon rate, the bondholder’s…The 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 pay, and a bondholder’s required return reflects the return that a bondholder to receive from a given investment. The mathematics of bond valuation imply a predictable relationship between the bond’s coupon rate, the bondholder’s required…
- Explain whether the following statements are true or false. Justify your answer. a) If interest rate increase the price of a shorter maturity bond will decrease more then a longer maturity bond. b) If rating agencies downgrade a bond, the yield to maturiy on the bond will increase.Explain the concept of bond price elasticity. Would bond price elasticity suggest a higher price sensitivity for zero-coupon bonds or high-coupon bonds that are offering the same yield to maturity? Why? What does this suggest about the market value volatility of mutual funds containing zero-coupon Treasury bonds versus high-coupon Treasury bonds?A bond has a market price that exceeds its face value. Which one of these features currently applies tothis bond?Select one:a. Yield to maturity less than the coupon rate.b. Currently selling at par.c. Current yield greater than coupon rate.d. Yield to maturity equal to the current yield.e. Discount bond.
