Its coupon As a bond approaches maturity, its value is approaching $1000 plus the discount or premium, assuming all conditions stay the same since its inception. The first statement is ..... The second statement is . The third statement is ...........

Its coupon As a bond approaches maturity, its value is approaching $1000 plus the discount or premium, assuming all conditions stay the same since its inception. The first statement is ..... The second statement is . The third statement is ...........

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter5: The Cost Of Money (interest Rates)

Section: Chapter Questions

Problem 7PROB

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Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

Question

D3)

5. A discount bond has its current YTM above its coupon rate. A premium bon has its current
YTM below its coupon rate. As a bond approaches maturity, its value is approaching $1000 plus
the discount or premium, assuming all conditions stay the same since its inception. The first
statement is .... The second statement is... The third statement is ...
a. true; false; false
b. true; true; false
c. false; true; false
d false; false; true
e. false; false; false

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