Question

True or False: g. The price of a bond in between coupons payments includes the interest earned on all previous coupon payments. h. If coupon rate and yield are the same then the price of the bond equals the maturity (face) value. i. _ _Anti-derivatives differ by a multiplicative constant. J. _ _Macaulay Duration is at most the term of a bond.

Answer 1

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Answer:

g)

True as the PV of the bonds sold in the market includes accrued interest on the bond

h)

Yes, as Coupon rate = YTM, the bond's face value will be equal to the face value

i)

True as

Suppose A(x) and B(x) are two different antiderivatives of f(x) on some interval [a, b]. Then CA*)=f(x) = - dB(x) d(A(x) - B(x)) ) = 0 on [a,b] dx dx dx

j)

True as

A coupon paying bond will always have its duration less than its time to maturity. And Macualy diration is the weighted sum of cash flows hence will be less than the term of the bond