Explain in detail, in terms of current yield, capital gain yields and YTM, why: a) If YTM = coupon rate, bond price = par value? b) If YTM > coupon rate, then bond price < par value? c) IF YTM < coupon rate, then bond price > par value? AND also give the name of the bond in each scenario.
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7. Explain in detail, in terms of current yield,
a) If YTM = coupon rate,
b) If YTM > coupon rate, then bond price < par value?
c) IF YTM < coupon rate, then bond price > par value?
AND also give the name of the bond in each scenario.
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- What will be the price of a bond in which the YTM is higher than the coupon rate? a. Below face value b. At face value c. Above face value d. Cannot be determineda) All things being equal If a bond's coupon rate is higher than its yieldto maturity (YTM), is the bond selling at a discount, premium or par?b) All things being equal If a bond's coupon rate is lower than its yield tomaturity (YTM), is the bond selling at a discount, premium or par?c) All things being equal If a bond's coupon rate is equal to its yield tomaturity (YTM), then is the bond selling at a discount, premium or par?d) All else being equal, the longer the term to maturity, the greater orthe lower the duration?f) All else being equal, the higher the coupon rate on the bond, theshorter or the longer the duration of the bond?2 The rate of return earned on a bond if it is held until maturity is its: Group of answer choices sinking fund yield. yield-to-maturity. coupon payment. yield-to-call.
- e. If the bondholder’s required rate of return equals the coupon interest rate, the bondwill sell at _________.What is the current yield? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Round your answer to two decimal places. % Is this yield affected by whether the bond is likely to be called? If the bond is called, the capital gains yield will remain the same but the current yield will be different. If the bond is called, the current yield and the capital gains yield will both be different. If the bond is called, the current yield and the capital gains yield will remain the same but the coupon rate will be different. If the bond is called, the current yield will remain the same but the capital gains yield will be different. If the bond is called, the current yield and the capital gains yield will remain the same.State whether the following statement is True or False and explain why. “A bond’s price is higher when its fixed rate of coupon is higher.”
- Select one or more of the following phrases to complete this question: increase , decrease, par, discount, premium, less than, more than, greater , less, fall, rise As interest rate increases the value of a bond will ______________. When interest rates __________, the market required rates of return ________, and thebond prices will ________. If interest rates increase after a bond issue, the yield-to-maturity will ______,Describe the differences between the yield to maturity (YTM) and the yield to call (YTC) on a bond. Why would the return to the investor be different if a bond is called? Justify your answerIn the context of coupon-paying bonds, which of the following are most likely determined bymarket forces?I. The current yield.II. The yield to maturity.III. The coupon rate. A. I only.B. II only.C. I and II only.D. I and III only
- 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).which of the below does not qualify a bond ? a. Time to maturity b. Par Value c. Coupon rate d. Yield to Maturity e. Current yieldWhich 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 bond
