Q: What is the connection between the interest rate and the price of a fixed coupon bond? Why is this…
A: The cost of bonds issued is attractive. Interest is paid at predetermined intervals. Bondholders are…
Q: Why does the yield on a discount bond surpass the coupon rate
A: Introduction:The bond will trade at a discount if the yield to maturity (YTM) exceeds the coupon…
Q: Define the word "bond price elasticity." Would the elasticity of bond prices suggest that…
A: Introduction: Bond price elasticity refers to the degree to which a bond's price is sensitive to…
Q: Write features of Zero-coupon bond and why do investors buy it when they offer nothing periodically?
A: A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep…
Q: If you expect the interest rate to fall, which bond will give you the highest price appreciation?…
A: A bond is a debt instrument that is issued by the organization to raise the funds from the investor…
Q: Why do we say a coupon bond can be seen as a package of zero-coupon bonds?
A: A coupon bond is a financial instrument that entails receipt of periodic payments, that is coupon…
Q: Since bonds always come with a coupon rate, why is it still important to check the yield to maturity…
A: Bonds pay periodic coupons which is calculated as a percentage of the face value of the bond. It is…
Q: if a coupon bond are selling at a discount then?
A: Solution: If a coupon bond are selling at a discount then it means market interest rate of similar…
Q: Do bondholders fare better when the yield to maturityincreases or when it decreases? Why?
A: When the yield to maturity increases, this represents a decrease in the price of the bond. Ifthe…
Q: Why does the yield of a bond that trades at a discount exceeds the bond’s coupon rate?
A: Where yield to maturity(YTM) is exceed coupon rate payable on bond, the bond will trade at discount.…
Q: A "discount bond" has a price less than face value because ________________. A) the issuing firm…
A: Discount Bond - Discount bond is something which is issued below its Par value, but it does not mean…
Q: Describe the relationship between bond prices and inclation. would you be more inclined to buy bonds…
A: Bond prices have an inverse relation o interest rates. When the interest rates increase, the bond…
Q: Give a definition for the term "bond price elasticity." Would the price elasticity of bonds imply…
A: Introduction: Securities such as bonds are debt obligations issued by firms, securitized as…
Q: When a firm gets riskier what will happen to its bonds Multiple Choice the market interest rate…
A: The primary risk associated with bonds are interest rate risk and market risk some corporation bonds…
Q: What will be the price of a bond in which the YTM is higher than the coupon rate? a. Below face…
A: The bond value can be determined looking at the relationship of coupon rate and YTM. If the YTM of…
Q: If you buy a callable bond and interest rates decline, will the value of your bond rise by asmuch as…
A: Bond valuation refers to the evaluation of bond value at any point of time, which can be used for…
Q: This section describes how investors may benefit from zero coupon bonds.
A: Introduction: When a bond is issued below par value and matures at par value, it is called a…
Q: Does it make any difference if the coupon rate on a bond is more than the needed rate of return on…
A: Introduction: Bond prices are determined by the needed rate of return on the bond, and bond prices…
Q: Which of the following is correct? Group of answer choices 1. The lower the price you pay for a…
A: An overpriced bond is one whose price is more than its value. Therefore, 2nd option is incorrect.…
Q: An investor invests in a fixed-rate bond because: His calculated value for the bond is greater…
A: Correct option is (3)- He is happy with the yield of the bond when considering its risk
Q: When would it make sense for a firm to call a bond issue? A) when the market price of the bond…
A: Bonds are debt securities issued by Government or other companies, who seek to raise money from…
Q: Why does the market value differ from its par value when the coupon interest rate does not equal the…
A: Par Value is the denominated value of bond which is used for coupon calculation whereas market price…
Q: Assume that breaking news causes bond portfolio managers (fixed income portfolio managers) to…
A: The question is based on the concept of interest rate and its impact on the bond price. As the…
Q: What is the convexity of a coupon bond? Why do investors tend to have a positive view of convexity?
A: Convexity is an indicator of the skewed relationship between bond prices with yields. Convexity…
Q: t is the interest rate that the buyer will actually earn if the bond is held to maturity and there…
A: Bonds are the debt obligations of a business on which it requires to pay regular interest to the…
Q: Without the threat of inflation, an increase in the money supply could reduce interest rates and…
A: Inflation is defined as an increase in the rate of prices over the particular period of the time and…
Q: What is the relationship between the price of a fixed coupon bond and the interest rate? Why does…
A: Bonds are issued by the company to meet the financial requirements of the company without losing its…
Q: Do bondholders fare better when the yeild to maturity increases or when it decreases? Why?
A: A bondholder refers to an investor or any owner of debt securities which large corporations or the…
Q: zero-coupon bonds or high-coupon bonds that are offering the same yield to maturity?
A: Bond price elasticity means sensitivity of a bond price to changes market interets rate. Zero coupon…
Q: price of a long-term (longer-maturity) bond more or less sensitive to changes in interest rates than…
A: Long term bonds are more sensitive to change in interest rates than short term bond. If Interest…
Q: A bond’s coupon rate is more than the interest rate, therefore the bond is selling at a
A: BOND COUPON RATE- Coupon rate is that the rate of interest paid by bond issuers on the bond's…
Q: How the zero coupon bond provide returns to investors
A: Zero-Coupon Bond -It is a kind of bond that is issued below the par value and matured at the par…
Q: What is a bond’s market value when the required rate of return (ie market rate) is less than the…
A: Bond: A bond is a kind of debt instrument shaped for the determination of raising capital. It is…
Q: If you pay a price to buy a bond that is below its value, you will get a return that is lower than…
A: The statement is false
Q: what happens to the bond prices when interest rate falls?
A: At the point when interest rates increase, the bond price downfall, and bond costs ascend as loan…
Q: If the yield curve in the bond market shows a flat curve, what do you think about the prediction of…
A: Yield Curve - It is a line on graph withbond yield in Y-axis and Maturity in X-axis. These curves…
Q: For a conventional bond paying a fixed coupon rate, an INCREASE in the risk of default would lead…
A: Default risk: Default risk can be defined as the risk that the borrower of the money will not pay…
Q: What are the characteristics of a zero-coupon bond, and why do investors purchase them when they…
A: Zero coupon bonds are bonds that do not pay interest during the life time of bonds.
Q: 1. Why do the prices of fixed-rate bonds fall if expectations for inflation rise?
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: explain how fluctuating market interest rates impact the price of a bond being sold on the secondary…
A: Bonds represent the liability for the company that is posted under the head non current liabilities…
Explain why the dirty price of a bond might fall sharply before the next coupon is paid?
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Solved in 2 steps
- a rise in risk premium will cause bond market prices to rise? true or false?What is the connection between the interest rate and the price of a fixed coupon bond? Why is this relationship still going strong?For the holder of a fixed-rate coupon bond, reinvestment risk is a bigger problem during a period of falling interest rates than during a period of rising interest rates. Why, Explain.
- You predict that interest rates are about to fall. Which bond will give you the highest capital gain?a. Low coupon, long maturity.b. High coupon, short maturity.c. High coupon, long maturity.d. Zero coupon, long maturity.Write features of Zero-coupon bond and why do investors buy it when they offer nothing periodically?Does it make any difference if the coupon rate on a bond is more than the needed rate of return on the bond, as long as the required rate of return is greater than the coupon rate? Explain.
- If the YTM is less than the coupon rate, wouldn't the bond price be higher?Without the threat of inflation, an increase in the money supply could reduce interest rates and bond prices would increase. Thus, bond portfolio managers would purchase more bonds now, causing immediate upward pressure on bond prices. True or False?Why does the market value differ from its par value when the coupon interest rate does not equal the market yield to maturity on a comparable-risk bond?
- If you buy a callable bond and interest rates decline, will the value of your bond rise by asmuch as it would have risen if the bond had not been callable? Explain.A "discount bond" has a price less than face value because ________________. A) the issuing firm has a high probability of default B) the issuing firm has a low probability of default C) the bond coupon rate is greater than the yield to maturity D) the bond coupon rate is less than the yield to maturityWhat 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 determined
