You predict that interest rates are about to fall. Which bond will show the biggest price increase? Low coupon, short maturity High coupon, long maturity Low coupon, long maturity High coupon, short maturity
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- You predict that interest rates are about to fall. Which bond will give you the highest capital gain?a. Low coupon, long maturity.b. High coupon, short maturity.c. High coupon, long maturity.d. Zero coupon, long maturity.If you expect the interest rate to fall, which bond will give you the highest price appreciation? Group of answer choices High coupon, short maturity Zero coupon, short maturity Zero coupon, long maturity High coupon, long maturityWhich one of the following will decrease the current yield of a bond? changing the frequency of coupon payment from semi-annual to annual. increasing the face value. increasing the coupon rate. decreasing the yield to maturity. decreasing the bond price.
- Bond traders, currently in possession of the bonds, are hoping for the Group of answer choices yield to remain steady. coupon rate to rise. yield to rise. yield to fall. coupon rate to fall.The coupon rate is greater than the yield to maturity when a bond sells at a premium. Select one: True FalseExplain whether the following statements are true or false. Justify your answer. a) If interest rate increase the price of a shorter maturity bond will decrease more then a longer maturity bond. b) If rating agencies downgrade a bond, the yield to maturiy on the bond will increase.
- In the next period however, the interest rate changes unexpectedly to I’ . What is the new price of the bond? If the bond is sold at the beginning of that next period, what is the yield from the consol? Does the yield increase or decrease if I’ > i?It is the interest rate that the buyer will actually earn if the bond is held to maturity and there is no default. A. yield to maturity B. no choice given c. current yield d. coupon discount rate e. coupon payment rate. If the current interest rate exceeds the bond’s coupon rate, the bond will sell at a___________. The value of a bond to increase if there is a/an ________ in interest rates. A bond’s coupon rate is more than the interest rate, therefore the bond is selling at a_____________. As interest rate increases the value of a bond will ______________. If the bondholder’s required rate of return equals the coupon interest rate, the bond will sell at _________. A premium bond sells for ____________ as maturity approaches. The discount bond sells for ____________ as maturity approaches. A bondholder with a short-term bond is exposed to ___________ interest rate risk than when owing a long-term bond. When interest rates __________, the market required rates of return ________, and the bond prices will ________. If interest rates increase after a bond issue, the yield-to-maturity will ______,
- (a) You hold a consol that pays a coupon C in perpetuity. The current interest rate is i, and the average expectation in the market is that this will remainunchanged. What will be the price of the consol today? (b) In the next period however, the interest rate changes unexpectedly to i'. What is the new price of the bond? If the bond is sold at the beginning of that next period, what is the yield from the consol? Does the yield increase or decrease if i'> i? (c) Suppose alternatively that the market expects that the interest rate will change to i' after the initial period. What is the initial value of the consol, and whatis the yield from selling it after one period?If interest rates rose, would you be happier if you have a low-coupon bond or a high-coupon bond?A "discount bond" has a price less than face value because ________________. A) the issuing firm has a high probability of default B) the issuing firm has a low probability of default C) the bond coupon rate is greater than the yield to maturity D) the bond coupon rate is less than the yield to maturity
