Answered: The two main factors that determine the…

The two main factors that determine the market interest rate on a loan or bond are: Length of time .and Risk True O False O

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 11QTD

See similar textbooks

Related questions

Q: What does a bond issue's "call" feature entail? What effect does the call feature have on bond…

A: This question deals with the "call" feature of a bond issuance entails and the call feature's effect…

Q: What impact do interest rates have on bond prices? What are the basic assumptions that go into…

A: This question explains about the fundamental assumptions that go into establishing the value of a…

Q: Explain why modified duration a better measure is than maturity when calculating the bond’s…

A: Modified duration is also known as volatility of bond. Ir indicates change in the price of bond with…

Q: What is the excess of the issue price of bonds over their face amount called? premium discount…

A: Premium on Bonds: When bond market costs higher than its face value then bonds is called at premium.…

Q: How do you calculate the price of bonds if you have the par value, contract rate, and market rate

A: This question teals about If you know the par value, contract rate, and market rate of bonds, you…

Q: Discuss how the amount of time before a bond matures affects the link between market interest rates…

A: This question considers how the amount of time until a bond matures influences the relationship…

Q: risk and what is the relation between interest rate risk and callable bonds. Explain with the help…

A: Interest rate risk : In simple words, Interest rate risk refers to the possibility of investment…

Q: Interpret the distinction between real and nominal interest rates

A: Introduction: The term interest rate can be defined as the amount which is due on the proportion of…

Q: What is the relationship between interest rates and bond valuations? What are the fundamental…

A: A bond is borrowing security issued by the company to raise funds from the market by making an…

Q: What is the link between the price of a bond and the rate of interest? Describe the origins of this…

A: This question describes the relationship between the price of a bond and the rate of interest, as…

Q: a) In each of the following parts, write an expression that shows the relationship among the listed…

A: Bonds are debt instruments which are used as an instrument to raise funds. Issuer who raise debt has…

Q: What is interest rate risk, and how does it relate to callable bonds? Explain using an example of…

A: This question discusses callable bonds.

Q: What is the difference between the stated interest rate andthe market interest rate on a bond?

A: Interest: It can be defined as the cost that is paid by the borrower for using the money borrowed…

Q: A) The rate of return on a bond is expected but the interest rate is unexpected.

A: Interest rates refer to the proportion of the loan which is to be paid by the borrower to the lender…

Q: why modified duration is a better measure than maturity when calculating a bond’s sensitivity to…

A: Macaulay duration is the weighted average term of maturity of the cash flow generated through the…

Q: In the bond market, provide a list of the variables that influence the equilibrium interest rate and…

A: Introduction: The price at which the quantity of cash requested is equal to the amount of money…

Q: All else equal, which bond's price is more affected by a change in interest rates, a short-term bond…

A: Solution:- We know, interest rate and the price of bond are inversely related. Duration means change…

Q: what is difference between a bond and a term loan? what are the advantages of a term loan over a…

A: A bond is a fixed-income security that speaks to credit to a borrower (normally corporate or…

Q: The amount borrowed on a fixed-payment loan, the payments on the loan, and the yield to maturity.…

A: Comment- Since we only answer up to 3 sub-parts, we’ll answer the 3 parts. Please resubmit the…

Q: What effect does collateral have on the interest rate paid on a bond? Subordination also has an…

A: Many variables influence the interest rate on a bond, including collateral, subordination, and so…

Q: Distinguish between the following interest rates for bonds payable:(a) Yield rate. (d) Market…

Q: link between the price of bonds and the rate of interest?

A: There is a inverse relationship between price of bonds and rate of interest. If interest rate…

Q: What happens when a bond's market rate is less than the stated rate?

Q: What is the relationship between bond price and interest rate? Describe in fully how this…

A: Bonds are referred to as those investment securities which are issued by companies as units of…

Q: Does the interest rate on a T-bond include a default risk premium? Explain.

A: Treasury bonds (T – Bonds) are the bonds which are issued by the U.S. Federal Government in form of…

Q: To calculate a gain or loss on redemption of a bond, you compare a. The market interest rate to the…

A: Bonds are considered a financial instrument used to raise finance for the organization. It is also…

Q: The effective interest technique is used to charge a discount on a bond that is due to be paid to…

A: The most effective approach to generating interest is... To amortize a bond over some time, the…

Q: If bonds issue at a discount, is the stated interest rate less than, equal to, or more than the…

A: Bonds: Bonds are a kind of interest bearing notes payable, usually issued by companies, universities…

Q: Long-term bonds have greater interest rate risk than do short-term bonds.

A: Interest Rate Risk: Interest rate risk is the rate for the losses to the investments because of…

Q: A bondholder with a short-term bond is exposed to ______________ interest rate risk than when owing…

A: A bond refers to the financial instruments which are issued by financial institutions for raising…

Q: Which of the following does not impact the calculation ofthe cash interest payments to be made to…

Q: When the effective interest rate method is used, the amortization of the bond premium

A: Amortization of bond: The process of allocation and reduction of the discount or premium on bonds to…

Q: What is the straight-line amortization technique for a bond discount or premium?

A: Bond with a straight-line amortization schedule The straight-line amortization technique is a way of…

Q: When interest rates __________, the market required rates of return ________, and the bond prices…

A: Bond is debt-instrument that is used by entities t raise debt funds from public-at-large. Bonds pay…

Q: If interest rates rise after a bond issue, what would happen to the bond's price and YTM? Does the…

A: Bond is the agreement between the company and investor regarding a fixed payment is provided to the…

Q: Discuss how the amount of time before a bond's maturity affects the link between market rates of…

A: This question explains about the amount of time before a bond's maturity affects the link between…

Q: The rate of interest actually earned by bondholders is called the Select one: O a. effective rate. O…

A: Solution Concept If the coupon rate of bond is greater than the market rate of interest , bond is…

Q: The selling price for bonds is computed by calculating the present value of future cash receipts by…

A: A bond is a liability for the company on which the company would require to pay the interest until…

Q: a) In each of the following parts, write an expression that shows the relationship among the listed…

A: Comment- We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Question

The two main factors that
determine the market
interest rate on a loan or
bond are: Length of time
.and Risk
True O
False O
التالی و
السابق

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1 Introduction

VIEW

Step 2 Explanation

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

In the PMT function, what is not true about the rate argument? Group of answer choices It assumes an annual interest rate. It can contain references to fields. It is optional. It reflects the interest charged on a loan.
Describe a short-term financing option and discuss the advantages and disadvantages. Is there a limit to the amount of a short-term bank loan?
How can the effect of below-market-rate loans on value be determined using investor criteria?
How is the market interest rate in the short-term and long-term financial market affected under the Pure Expectations theory when suppliers and users of loanable funds expect that interest rates will decrease the next year?
Credit scoring is a process used to Multiple Choice determine what interest rate to charge a borrower, based on risk considerations. determine the amortization period for a term loan, based on risk considerations. calculate a borrower's return on equity. calculate a borrower's leverage position.
Which of the following statements regarding fixed-rate loans is true? Group of answer choices a. Fixed-rate loans are preferable if interest rates are expected to rise. b. The cost of fixed-rate loans increases with an increase in the market interest rate. c. The cost of fixed-rate loans decreases with a decrease in the market interest rate. d. Fixed-rate loans are preferable if interest rates are expected to fall. e. Fixed-rate loans have periodic adjustment dates, at which time the interest rate and monthly payment are adjusted as necessary.
What can you calculate with the Excel argument FV? Number of periods of time for a loan or investment. Interest rate. Future value of an investment based on a constant interest rate. The constant periodic payment required to pay off a loan or investment.
From the standpoint of the borrower, is long-term or short-term credit riskier? Explain. Would it ever make sense to borrow on a short-term basis ifshort-term rates were above long-term rates?
Why is credit risk management important and what are the features of a loan or debt instrument it determines? What is the difference between a spot loan and revolving loan? What is loan commitment? What are the different rates that have replaced LIBOR and in what countries/economic blocs are they used in? What are the borrower and market specific factors that impact the return on a loan for a financial institution? Are higher interest rates a restrictive or stimulative form of monetary policy and explain your answer?
If you were comparing the costs of loans from different lenders, could you use their APRs to determine the loan with the lowest effective interest rate?
A forward rate is a borrowing/lending rate for a loan to be made at some future date. Select one: True False
From the standpoint of a borrower, is long-term or short-term credit riskier? Explain.