he following statements is TRUE? emand for a bond declines when it becomes less liquid, decreasing the in elatively more liquid bonds. prporate bond market is the most liquid bond market. ifferences in bond interest rates reflect differences in default risk only.
Q: There are no cash fow effects for the issuer of a zero coupon bond except for the tal cash inflow…
A: Zero coupon bond is the bond in which coupon is not paid. The redemption value is higher than the…
Q: A bondholder with a short-term bond is exposed to ___________ interest rate risk than when owing a…
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A: Interest rate risk refers to the sensitivity of the bond prices to the interest rate changes. There…
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A: Bond is a debt fixed interest bearing instrument that is issued by the company to raise funds from…
Q: (e) Do you agree with the following statement, and explain why? "If two bonds have the same…
A: Please find the answers to the above questions below:
Q: which of the below has a negative correlation with the return on bonds ? a. Taxability b. Default…
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A: Bonds pay periodic coupons which is calculated as a percentage of the face value of the bond. It is…
Q: Price of short-term bond are less volatile than long-term bonds. But yield to maturity of long-term…
A:
Q: Which is not considered in bond valuation? a. The required rate of return of the investors which…
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A: Please find the answer to the above question below:
Q: Explain whether the following statements are true or false. Justify your answer. a) If interest…
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A: Interest rate risk: It refers to the risk occured with changes in interest rate. It is also known as…
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A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
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Q: Which of the following is incorrect regarding margin trading? O a. The relationship between security…
A: Margin trading (MT) is the benefit which is provided by the trader to the investors to purchase…
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A:
Q: Which of the following statements is correct? Group of answer choices The actual capital gains yield…
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A: The risk of investment losses due to the shift in interest rates is known as interest rate risk. It…
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A: bond has different features
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Q: 1)Which of the following is NOT true regarding bonds?
A: NOTE: As per our policy, we only answer one question when different questions are posted. Therefore…
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A: Bond is a contract under which a borrower promises to pay interest and principal on a specific dates…
Q: zero-coupon bonds or high-coupon bonds that are offering the same yield to maturity?
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A: Default risk: Default risk can be defined as the risk that the borrower of the money will not pay…
Q: If interest rates were to increase, then [select the statement that is most correct] Only long term…
A: Solution:- Interest rate means the rate of return prevailing in the market.
Q: Bond Relationships. Select one or more of the following phrases to complete the following sentences.…
A: Bonds are a form of debt of the company. When bonds are issued at a value less than its face value,…
Q: if an investor expects interest rates to _______________ she/he will choose a bond with
A: A bond is a debt component issued by the entity for generating cash. It is recorded as non-current…
Q: The market value of a bond will be less than the par value if the market's required yield to…
A: The market price of a bond is the present value of all the future cash inflows.
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A: Bonds act as long-term debt for the issuer as the issuer is under the obligation to pay regular…
Q: “Short-term interest rates are more volatile than long-term interest rates, soshort-term bond prices…
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- Which one of the following statements is NOT true? As interest rates increase, bond prices increase. Interest rate risk is the risk that bond prices will change as interest rates change. Interest rate changes and bond prices are inversely related. Long-term bonds have more price volatility than short-term bonds of similar riskWhich of the following statements is CORRECT? a. If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices. b. The total yield on a bond is derived from dividends plus changes in the price of the bond. c. Bonds are generally regarded as being riskier than common stocks, therefore bonds have higher required returns. d. Bonds issued by larger companies always have lower yields to maturity (due to less risk) than bonds issued by smaller companies. e. The market price of a bond will always approach its par value as its maturity date approaches, provided the bond's required return remains constant. THE ANSWER IS NOT E OR B, apparently, but please let me know if you really think one of those choices are correct.Explain how does a bond par value differs from its market value? Are variable rate bonds attractive to investors who expect the interest rates to decrease? Explain. Would a firm that needs to borrow funds consider issuing variable rate bonds if it expects interest rates to decrease in the future? Explain.
- Rate the following statement as True of False: "Although, Convexity is listed as a 'risk' to bond investors, it is actually a benefit to investors who own bonds. This is because when a bond has high convexity an investor will make more money for a given drop in interest rates, than he or she will lose given the same magnitude increase in interest rates. Thus, more convexity means more potential upside relative to downside for a bond investor, given that yields are equally likely to move up or down by the same amount." True of False?Give typing answer with explanation and conclusion TRUE or FALSE?) The reinvestment risk of a bond happens when the market rates change, we will be reinvesting the cash flows at a different rate than what we expected.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? Group of answer choices A) More than one of the other statements are correct B) None of the other statements are correct C) A government bond with a fixed coupon rate may be valued below its’ face value even though the promised cash flows are effectively riskless. D) 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. E) 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.
- Price risk is the risk that Select one: a. the bond principal will not be paid in full or on time. b. market prices increase due to market interest rate changes making bonds more expensive to purchase. c. the bonds in a dedicated portfolio will decrease in value in response to an increase in interest rates. d. the yield-to-maturity will be less than the inflation risk causing the real rate of return to be negative. e. coupon payments will be reinvested at a rate that is less than the bond's yield-to-maturityCorporate bonds are riskier than US Treasury, so they pay default risk premium over what Treasury pays to stay competitive in the market. True False(a) “Both banks and the bond market complete maturity transformation although they accomplish the task differently.” True or false? Explain. (b) “Banks are middlemen that insert themselves into transactions between borrowers and savers.” True or false? Explain. (c) “When bond prices rise, interest rates (i.e., bond yields) also rise.” True or false? Explain.
- Select all the correct statements. a. The no-arbitrage price of a bond is equal to its present value. b. If there is an arbitrage opportunity, it means one can make a risk-free profit. c. Small arbitrage opportunities may occasionally exist in real markets due to lack of information. d. The law of one price is based on the no-arbitrage assumption. e. Arbitrary investments and arbitrage generating investments are basically the sameWhich of the following statements is false? A. Other things being equal, an increase in a bond’s maturity will increase its interest rate risk. B. Other things being equal, an increase in the coupon rate of a bond will decrease its interest rate risk. C. Other things being equal, an increase in a bond’s YTM will decrease its interest rate risk. D. Effective duration is calculated as Macaulay duration divided by one plus the bond’s yield to maturity.if we see an increase in default rates, what may that mean for the junk bond market and for companies that want/need to sell more junk bonds?