Which of the following is FALSE? A bond is trading at par if its coupon rate equals interest rates in the market A bond is trading below par if its coupon rate is above interest rates in the market A bond is trading above par if its coupon rate is greater than interest rates in the market A bond is trading below par if its coupon rate is below interest rates in the market

Which of the following is FALSE? A bond is trading at par if its coupon rate equals interest rates in the market A bond is trading below par if its coupon rate is above interest rates in the market A bond is trading above par if its coupon rate is greater than interest rates in the market A bond is trading below par if its coupon rate is below interest rates in the market

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 2Q: Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices...

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When would it make sense for a firm to call a bond issue? A) when the market price of the bond exceeds the call price, and market interest rates are greater than the bond's coupon rate B) when the market price of the bond exceeds the call price, and market interest rates are less than the bond's coupon rate C) when the market price of the bond is less than the call price, and market interest rates are greater than the bond's coupon rate D) when the market price of the bond is less than the call price, and market interest rates are less than the bond's coupon rate
Which of the following statement on bond valuation is correct? A. If bond price is greater than bond face value, the bond is mispriced and no investor will be interested in the bond. B. If YTM is greater than coupon rate, the bond price is greater than the bond face value. C. If the coupon rate is greater than the YTM, the bond price is less than the bond face value. D. If the coupon rate is less than the YTM, the bond price is less than the bond face value.
Which 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.
Why does the market value differ from its par value when the coupon interest rate does not equal the market yield to maturity on a comparable-risk bond?
Why does the yield of a bond that trades at a discount exceeds the bond’s coupon rate?
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 risk
Which of the following statements is CORRECT? a. The yield to maturity for a coupon bond that sells at a premium consists entirely of a positive capital gains yield; it has a zero current interest yield. b. The yield to maturity on a coupon bond that sells at its par value consists entirely of a current interest yield; it has a zero expected capital gains yield. c. Rising inflation makes the actual yield to maturity on a bond greater than a quoted yield to maturity that is based on market prices. d. The market value of a bond will always approach its par value as its maturity date approaches. This holds true even if the firm has filed for bankruptcy. e. The expected capital gains yield on a bond will always be zero or positive because no investor would purchase a bond with an expected capital loss.
1)Which of the following is NOT true regarding bonds? Group of answer choices A)If a bond is selling at a discount, then the current yield is greater than the yield-to-maturity. B)An increase in market interest rates leads to a decrease in bond prices. C)If the coupon rate on a bond is lower than the yield-to-maturity, the bond sells at a discount. D)If the coupon rate on a bond equals the yield-to-maturity, then the bond sells at par. 2)When calculating free cash flows, which of the following statements is NOT true regarding the depreciation? Group of answer choices A)As an accrual, depreciation does not factor into free cash flow calculations. B)Depreciation is an accrual, not a cash flow. C)Depreciation create a tax shield. D)Depreciation is first removed and the subsequently added back in when calculating free cash flows.
The coupon rate is calculated on the bond's face value (or par value), not on the issue price or market value. Choices: true or false
Which of the following statements is CORRECT? a. A bond is likely to be called if it sells at a discount below par. b. A bond is likely to be called if it sells at a premium above par c. A bond is likely to be called if its market price is equal to its par value. d. A bond is likely to be called if its market price is below its par value.
Which of the following statements about the Macaulay duration of a coupon bond is true? Select one alternative: a.. The duration does not change after the bond is issued. b. The duration will decrease as the yield to maturity decreases. c. None of the other statements is true. d. The duration can precisely predict the price change of the bond for any interest rate change.
A bond will sell at a premium when its coupon interest rate: is lower than the market interest rate on similar bonds. O exceeds the market interest rate on similar bonds. O varies more than the market interest rate on similar bonds. O equals the market interest rate on similar bonds.