FINANCE 601 ACCESS CODE (CUSTOM)
16th Edition
ISBN: 9781259867668
Author: Ross
Publisher: MCG CUSTOM
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Question
Chapter 8, Problem 32QP
Summary Introduction
To identify: Reasons to invest the buying of treasury bond with a negative yield to maturity.
Treasury Bonds:
Treasury bonds are long term debt instruments issued by federal government. They are fixed interest bearing instrument and are likely to be matured after a period of 10 years.
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Students have asked these similar questions
a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating?b. What is the credit spread on AAA-rated corporate bonds?c. What is the credit spread on B-rated corporate bonds?d. How does the credit spread change with the bond rating? Why?
Security Yield
Treasury 3.120AAA corporate 3.874BBB corporate 4.521B corporate 5.328
Which of the following statements is right?
Group of answer choices
a)Ignoring the liquidity risk, the 10-treasry bond should have the same interest rate as the 10-year corporate bond.
b)Ignoring the default risk, the 10-treasry bond should have the same interest rate as the 10-year corporate bond.
c)The return of the 10-year treasury bond must be less than that of the 10-year corporate bond
d)The return of the 10-year treasury bond must be greater than that of the 10-year corporate bond
Which of the following statements is CORRECT?
a. If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices.
b. The total yield on a bond is derived from dividends plus changes in the price of the bond.
c. Bonds are generally regarded as being riskier than common stocks, therefore bonds have higher required returns.
d. Bonds issued by larger companies always have lower yields to maturity (due to less risk) than bonds issued by smaller companies.
e. The market price of a bond will always approach its par value as its maturity date approaches, provided the bond's required return remains constant.
THE ANSWER IS NOT E OR B, apparently, but please let me know if you really think one of those choices are correct.
Chapter 8 Solutions
FINANCE 601 ACCESS CODE (CUSTOM)
Ch. 8 - Prob. 1CQCh. 8 - Prob. 2CQCh. 8 - Prob. 3CQCh. 8 - Yield to Maturity Treasury bid and ask quotes are...Ch. 8 - Coupon Rate How does a bond issuer decide on the...Ch. 8 - Real and Nominal Returns Are there any...Ch. 8 - Prob. 7CQCh. 8 - Prob. 8CQCh. 8 - Term Structure What is the difference between the...Ch. 8 - Crossover Bonds Looking back at the crossover...
Ch. 8 - Municipal Bonds Why is it that municipal bonds are...Ch. 8 - Prob. 12CQCh. 8 - Treasury Market Take a look back at Figure 8.4....Ch. 8 - Prob. 14CQCh. 8 - Bonds as Equity The 100-year bonds we discussed in...Ch. 8 - Bond Prices versus Yields a. What is the...Ch. 8 - Interest Rate Risk All else being the same, which...Ch. 8 - Valuing Bonds What is the price of a 15-year, zero...Ch. 8 - Valuing Bonds Microhard has issued a bond with the...Ch. 8 - Prob. 3QPCh. 8 - Coupon Rates Rhiannon Corporation has bonds on the...Ch. 8 - Valuing Bonds Even though most corporate bonds in...Ch. 8 - Prob. 6QPCh. 8 - Zero Coupon Bonds You find a zero coupon bond with...Ch. 8 - Valuing Bonds Yan Yan Corp. has a 2,000 par value...Ch. 8 - Prob. 9QPCh. 8 - Prob. 10QPCh. 8 - Inflation and Nominal Returns Suppose the real...Ch. 8 - Prob. 12QPCh. 8 - Prob. 13QPCh. 8 - Prob. 14QPCh. 8 - Prob. 15QPCh. 8 - Prob. 16QPCh. 8 - Bond Price Movements Miller Corporation has a...Ch. 8 - Interest Rate Risk Laurel, Inc., and Hardy Corp....Ch. 8 - Interest Rate Risk The Faulk Corp. has a 6 percent...Ch. 8 - Bond Yields Hacker Software has 6.2 percent coupon...Ch. 8 - Prob. 21QPCh. 8 - Prob. 22QPCh. 8 - Prob. 23QPCh. 8 - Prob. 24QPCh. 8 - Prob. 25QPCh. 8 - Prob. 26QPCh. 8 - Prob. 27QPCh. 8 - Prob. 28QPCh. 8 - Prob. 29QPCh. 8 - Holding Period Yield The YTM on a bond is the...Ch. 8 - Prob. 31QPCh. 8 - Prob. 32QPCh. 8 - Prob. 33QPCh. 8 - Prob. 34QPCh. 8 - Real Cash Flows Paul Adams owns a health club in...Ch. 8 - FINANCING EAST COAST YACHTS'S EXPANSION PLANS WITH...Ch. 8 - Prob. 2MCCh. 8 - Prob. 3MCCh. 8 - Prob. 4MCCh. 8 - Prob. 5MCCh. 8 - Are investors really made whole with a make-whole...Ch. 8 - After considering all the relevant factors, would...
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