Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left to maturity, and has a discount ráte of 6.5%. Further suppose you purchase this bond, but then, after you purchase it, you discover that the credit (i.e. "default" risk) on the bond has increased. Ceteris paribus, it follows that the present value (i.e. the market price) would and the yield would Select one: O a. increase; decrease O b. increase; increase c. decrease; increase O d. decrease; decrease
Suppose a ten-year bond with a $10,000 face value pays a 5.0% annual coupon (at the end of the year), has 2 years left to maturity, and has a discount ráte of 6.5%. Further suppose you purchase this bond, but then, after you purchase it, you discover that the credit (i.e. "default" risk) on the bond has increased. Ceteris paribus, it follows that the present value (i.e. the market price) would and the yield would Select one: O a. increase; decrease O b. increase; increase c. decrease; increase O d. decrease; decrease
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 22P: Yield to Maturity and Yield to Call
Arnot International’s bonds have a current market price of...
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