2.) If the yield on a bond decreases, the coupon amount increases the maturity value decreases...
2.) If the yield on a bond decreases,
|
the coupon amount increases |
||
|
the maturity value decreases |
||
|
the bond matures earlier |
||
|
the bond value increases |
3.) The beta is a measure of the ___________ associated with a stock.
|
standard deviation |
||
|
likelihood of default |
||
|
systematic risk |
||
|
trading discount |
Homework Answers
Valuation of bond is done by discounting the periodic coupon payments at the bond's YTM. So as the yield decreases the value of the bond increases.
Answer is the bond value increases
Beta is a measure of systematic risk of the stock. Systematic risks are risks emanating from the market as a whole and cannot be mitigated through diversification.
Answer is systematic risk
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2.) If the yield on a bond decreases,
the coupon amount increases
the maturity value decreases...
All else held constant, the present value of a bond increases when the: coupon rate decreases....
All else held constant, the present value of a bond increases when the: coupon rate decreases. yield to maturity decreases. current yield increases. time to maturity of a premium bond decreases. time to maturity of a zero coupon bond increases.
1. A bond with two years remaining until maturity offers a 3% coupon rate with interest...
1. A bond with two years remaining until maturity offers a 3% coupon rate with interest paid annually. At a market discount rate of 4%, find the price of this bond per 1000 of par value. 2. A bond offers an annual coupon rate of 5%, with interest paid semiannually. The bond matures in seven years. At a market discount rate of 3%, find the price of this bond per 1000 of par value. 3. A zero-coupon bond matures in...
The market price of a bond increases when the: coupon rate decreases. par value decreases. coupon...
The market price of a bond increases when the: coupon rate decreases. par value decreases. coupon is paid annually rather than semiannually. face value decreases. discount rate decreases.
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6.3%. You hold...
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6.3%. You hold the bond for five years before selling it a. If the bond's yield to maturity is 6.3% when you sell it, what is the annualized rate of return of your investment? b. If the bond's yield to maturity is 7.3% when you sell it, what is the annualized rate of return of your investment? c. If the bond's yield to maturity is 5.3% when...
90. What is the expected rate of return (yield to maturity) of a bond with a...
90. What is the expected rate of return (yield to maturity) of a bond with a 7.25% coupon interest rate that matures in 10 years’ time , which has a market price of $1000 (use the scientific calculator) …………………………………… 91. What is the value of a preferred stock when the dividend rate is 16% on a $100 par value? The appropriate discount rate for a stock of this risk level is 12%.
If the coupon rate is greater than the yield-to-maturity, then the bond will be selling at...
If the coupon rate is greater than the yield-to-maturity, then the bond will be selling at a discount. a) TRUE Ob) FALSE Question 10 (2 points) ✓ Saved In a typical fixed payment, fully amortizing loan (like a mortgage or auto loan), the amount of interest applied to each successive payment and the amount of principal applied to each successive payment throughout the life of the loan. a) increases; increases b) decreases: increases c) increases; decreases d) decreases; decreases 96...
QUESTION 23 When a bond's coupon rate is less than its yield-to-maturity the bond will be...
QUESTION 23 When a bond's coupon rate is less than its yield-to-maturity the bond will be a discount bond. True False QUESTION 24 Exposure to non-systematic risk is rewarded with higher expected return. Conversely, exposure to systematic risk is not rewarded with higher expected returns True False QUESTION 25 You invest the same dollar amount in 5 different securities. All else equal, diversification produces the greatest benefits if the correlation coefficients for the returns of the 5 securities are close...
1. The following table provides zero coupon bond yields. Maturity Bond equivalent yield 6 months 6%...
1. The following table provides zero coupon bond yields. Maturity Bond equivalent yield 6 months 6% 1 year 8% A 12% coupon bond with coupons paid semiannually matures in one year. The par value of the bond is $1,000. What is the price of this bond? [First identify the cash flows.] A. $1,030 B. $1,032 C. $1,034 D. $1,038 2. The following are the prices of zero coupon bonds. Par value is $1,000 in each case. Maturity Price 6 months...
a. Calculate the value of the bond. 1. How does the value change if the market's...
a. Calculate the value of the bond.
1. How does the value change if the market's required yield to
maturity on a comparable-risk bond (i) increases to 11 percent
or (ii) decreases to 6 percent?
2. Explain the implications of your answers in part b as they
relate to interest-rate risk, premium bonds, and discount
bonds.
3. Assume that the bond matures in15 years instead of 20 years.
Recompute your answers in parts a and b.
4. Explain the implications...
23. Compute the yield to maturity of a $2,500 par value bond with a coupon rate...
23. Compute the yield to maturity of a $2,500 par value bond with a coupon rate of 7.5% (quarterly payments - that is, four times per year) that matures in 25 years. The bond is currently selling for $3,265.
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6.3%. You hold the bond for five years before selling it a. If the bond's yield to maturity is 6.3% when you sell it, what is the annualized rate of return of your investment? b. If the bond's yield to maturity is 7.3% when you sell it, what is the annualized rate of return of your investment? c. If the bond's yield to maturity is 5.3% when...
If the coupon rate is greater than the yield-to-maturity, then the bond will be selling at a discount. a) TRUE Ob) FALSE Question 10 (2 points) ✓ Saved In a typical fixed payment, fully amortizing loan (like a mortgage or auto loan), the amount of interest applied to each successive payment and the amount of principal applied to each successive payment throughout the life of the loan. a) increases; increases b) decreases: increases c) increases; decreases d) decreases; decreases 96...
QUESTION 23 When a bond's coupon rate is less than its yield-to-maturity the bond will be a discount bond. True False QUESTION 24 Exposure to non-systematic risk is rewarded with higher expected return. Conversely, exposure to systematic risk is not rewarded with higher expected returns True False QUESTION 25 You invest the same dollar amount in 5 different securities. All else equal, diversification produces the greatest benefits if the correlation coefficients for the returns of the 5 securities are close...
a. Calculate the value of the bond.
1. How does the value change if the market's required yield to
maturity on a comparable-risk bond (i) increases to 11 percent
or (ii) decreases to 6 percent?
2. Explain the implications of your answers in part b as they
relate to interest-rate risk, premium bonds, and discount
bonds.
3. Assume that the bond matures in15 years instead of 20 years.
Recompute your answers in parts a and b.
4. Explain the implications...
23. Compute the yield to maturity of a $2,500 par value bond with a coupon rate of 7.5% (quarterly payments - that is, four times per year) that matures in 25 years. The bond is currently selling for $3,265.
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