Duration is a measurement of a bond’s interest rate risk. It is also referred to as the responsiveness or sensitivity of a bond’s full price to a change in its yield.
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Duration is a measurement of a bond’s interest rate risk. It is also referred to as the responsiveness or sensitivity of a
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- 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…
- Identify and discuss the relations among a bond’s coupon rate, the yield required by the market, and the bond’s price relative to par value (i.e., discount, premium, or equal to par).Money duration is the appropriate measure of interest rate risk for bonds with embedded options. Select one: True FalseDuration is a measure of __________________. A) yield to maturity of a bond. B) coupon rate of a bond C) price of a bond D) effective maturity of a bond
- Interest rate risk refers to changes in the bond's ______________ (coupon rate, credit rating, par value, or yield to maturity) , whereby a decrease in that item causes bond values to ___________ (increase, decrease, vary randomly, or remain constant )Which one of the following statements is true regarding bond valuation?a. When yield to maturity is higher than coupon rate, the bond is called a premium bondb. When yield to maturity is higher than coupon rate, the bond is traded at parc. When yield to maturity is less than coupon rate, the bond is called a discount bondd. When yield to maturity is higher than coupon rate, the bond is called a discount bonde. When yield to maturity is equal to coupon rate, the bond is called a premium bondWhich of the following measures the interest rate risk of a bond in dollars and cents? O Price Value of a Basis Point O Convexity O Modified Duration Duration.
