Which of the following statements about bond is incorrect? A. The longer the maturity, the more sensitive the bond's price to changes in yield to maturity. B. Yield to maturity assumes that all bond coupons can be reinvested at the same level of yield to maturity. C. The relationship between bond prices and yields to maturity is convex. D. The relationship between bond prices and yields to maturity is inverse. E. For a premium bond, the coupon rate is smaller than current yield.
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- 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.1. Which of the following is correct? Group of answer choices 1. The lower the price you pay for a bond, the greater is your return. 2. A bond is overpriced when its value is greater than its price. 3. A fairly priced bond has a price equal to its face. 4. The value of a bond can be determined by the present value of all coupon payments and the present value of principal payment at maturity date.1. When the market interest rate rises, what happens to bond prices? Group of answer choices They rise They stay the same Cannot be determined They fall 2. A bond discount occurs when: Group of answer choices The price of a bond is above its face value. The price of a bond is above its maturity value. The price of a bond is below its face value. The price of the bond is equal to a bond's face value. 3. When a bond sells for a premium, Group of answer choices The price is above the face value The price is equal to the face value. The price is below the face value The price is below the maturity value. 4. A bond has a face value of $100,000 and a price of $97,000. The journal entry at the date of issuance would include: Group of answer choices A credit to Bond Discount of 3,000 A debit to Bond Discount of 97,000 A debit to Bond Discount of 3,000 A credit to Bond Premium of 3,000 5. A bond has a face…
- Question 4 Assuming a bond is issued at a discount, which of the following would definitely not change over the life of the bond? A The yield to maturity of the bond B The price of the bond C The coupon rate of the bond D The current yield of the bond4) Bond analysts might be more interested in a bond's yield to call if A) the bond's yield to maturity is insufficient. B) interest rate is expected fall C) the investor only plans to hold the bond until its first call date. D) volatility is expected to rise. E) volatility is expected to fall. Provide an accurate answer with justification.Give typing answer with explanation and conclusion Question 16: Which of the following statements about convexity are true? I. Convexity accounts for the curvilinear function of bond rates II. A bond with a very low coupon and a long maturity will have low convexity III. A bond investor would seek to avoid bonds with high convexity. IV. Convexity is defined as the rate of change of the slope of the price/yield curve V. There is an inverse relationship between maturity and convexity a. I. b. II. III. IV. c. I. IV. d. II. IV. V. e. I. II. IV. V.
- 1. Under what conditions would the yield-to-maturity and current yield of a bond be equal? Group of answer choices a. The bond is priced at par b. The bond is priced at a discount c. Insufficient information d. The bond is priced at a premium 2. Which of the following is correct about the risk-free rate as used in valuing equity instruments? Group of answer choices a. The risk-free rate accounts for the rate of return or yield of a government instrument which does not carry any risk. b. The risk-free rate used for valuing equity instruments is normally the yield of a long-term government security. c. The risk-free rate used for valuing equity instruments is the same as that used for valuing short-term debt instruments. d. The risk-free rate accounts for the risks related to government securities which is composed of credit-spread, maturity risk premium and the real risk-free rate. 3. Berg Inc. has just paid a dividend of P2.00. Its stock is now selling…H4. Which statement is true? a. Duration is good for estimating the impact of large interest rate changes. b. The duration estimate is less accurate, the less convex the bond price/yield relationship. c. Effective duration is used to measure the price risk of the bonds with call options. d. The tangent line always overestimates the actual price36. One of the points below is the most accurate?a. When a bond sells at a premium, that means that the bond's yield to maturity is higher than the coupon rate.b. A coupon bond's present yield matches the yield to maturity whether it is sold at par.c. A zero coupon bond could sell for more than its par value if interest rates fell after it is issued.d. Both b and c are valid statements.e. None of the above claims are true.
- 5. Bond Relationships. Select one or more of the following phrases to complete the followingsentences. increase , decrease, par, discount, premium, less than, more than, greater , less, fall,rise a. If the current interest rate exceeds the bond’s coupon rate, the bond will sell at a___________.b. The value of a bond to increase if there is a/an ________ in interest rates.c. A bond’s coupon rate is more than the interest rate, therefore the bond is selling at a_____________.d. As interest rate increases the value of a bond will ______________.e. If the bondholder’s required rate of return equals the coupon interest rate, the bondwill sell at _________.f. A premium bond sells for ____________ as maturity approaches.g. The discount bond sells for ____________ as maturity approaches.h. A bondholder with a short-term bond is exposed to ___________ interest rate risk thanwhen owing a long-term bond.i. When interest rates __________, the market required rates of return ________, and thebond…Question 2 A lower bond rating directly translates into a higher, higher interest b. lower, higher interest Oc. higher; higher default d. lower, lower interest O e. higher; lower interest prices and PERS rates on the firm's bonds.4. Bond valuation The process of bond valuation is based on the fundamental concept that the current price of a security can be determined by calculating the present value of the cash flows that the security will generate in the future. There is a consistent and predictable relationship between a bond’s coupon rate, its par value, a bondholder’s required return, and the bond’s resulting intrinsic value. Trading at a discount, trading at a premium, and trading at par refer to particular relationships between a bond’s intrinsic value and its par value. This also results from the relationship between a bond’s coupon rate and a bondholder’s required rate of return. Remember, a bond’s coupon rate partially determines the interest-based return that a bondwill pay, and a bondholder’s required return reflects the return that a bondholderis obligated to receive from a given investment. The mathematics of bond valuation imply a predictable relationship between the bond’s…