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- Which factor(s) lead to the difference of the interest between T-bill and a short-term corporate bond? Group of answer choices a)Inflation rate b)Default risk and maturity risk c)Maturity risk d)Default risk( Fixed Income Securities) 18) F) Define the curvature of the term structure with respect to short-term, medium-term and long-term bonds and hence calculate the curvatures of the term structure at time t and time t+1 using the table below Term structure of interest rates Maturity Time t Time t+1 Short-term 3% 2% Medium-term 4% 5% Long-term 5% 4%1. Types of bonds Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. A. Which of the following statements about Treasury bonds is the most accurate? Treasury bonds have a very small amount of default risk, so they are not completely riskless. Treasury bonds are completely riskless. Treasury bonds are not completely riskless, since their prices will decline when interest rates rise. B. Based on the information given in the following statement, answer the questions that follow: In July 2009, Hungary successfully issued 1 billion euros in bonds. The transaction was managed by Citigroup. Who is the issuer of the bonds? The Hungarian government Hungary Bank Citigroup C. What type of bonds are these? Municipal bonds Corporate bonds Government bonds
- Nominal interest rate of a corporate bond includes all of the following components EXCEPT _____. Group of answer choices a. real risk-free interest rate b. expected inflation c. unexpected inflation d. credit risk premiumWhich factor(s) lead to the difference of the interest between T-bill and a short-term corporate bond? Group of answer choices Inflation rate Maturity risk Default risk and maturity risk Default riskIs this bond trading at a premium or a discount? Bond Current Yield Vol Close Net Change HWL 8 1/2 23 12 67.75 +7 Bond trading=
- A3) Finance Investment grade bonds have a rating of A or better. True FalseQuestion 47: Match each financial function to its best description. PMT PV Table FV Calculates the value of a bond at a later date Calculates the required payment for a bond Calculates the current value of a bondQUESTION EIGHTa) What is the relationship between the price of a bond and its YTM? b) Explain why some bonds sell at a premium over par value while other bonds sell at a discount.What do you know about the relationship between the coupon rate and the YTM for premiumbonds? What about for discount bonds? For bonds selling at par value? c) What is the relationship between the current yield and YTM for premium bonds? For discountbonds? For bonds selling at par value? SEBO PLC just paid a dividend of K2.75 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on SEBO stock is 13 percent, what will a share of stock sell for today?
- Q8 Which of the following bonds carry significant risk that the issuer will not make current or future payments? Multiple Choice junk bonds liquidity rate risk bonds credit quality risk bonds interest rate risk bondsQUESTION 19 Which of the following is not a correct statement about the bond? Bond can be either non-interest-bearing or interest-bearing. Non-interest-bearing bonds sell at discount upon issuance. Price of a discount bond will go up as it approaches maturity. There is an inverse relation between the bond price and interest rate. Baseline interest rate for the bond market is LIBOR rate.Comment on the attractiveness of the bonds in two ways: a) How does the yield compare to the benchmark? Market YTM: 3.62% YTM of bond: 3.72% b) How does the current price compare to the benchmark-yield implied price? Price: 100.875 Implied price: 100.923