HomeworkLib
Question

Explain why the yield of a bond that trades at a discount exceeds the​ bond's coupon rate.

Explain why the yield of a bond that trades at a discount exceeds the bond's coupon rate.

college   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer: The bond can be purchased for a discount, which gives it an "extra return"; hence, the yield exceeds the coupon.

answered by: Andrew San Andres
0 0
Add a comment
Know the answer?
Add Answer to:
Explain why the yield of a bond that trades at a discount exceeds the​ bond's coupon rate.
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Explain why the yield of a bond that trades at a discount exceeds the? bond's coupon...

    Explain why the yield of a bond that trades at a discount exceeds the? bond's coupon rate. ?(Select the best choice? below.) A. The bond can be purchased for a? discount, which gives it an? "extra return";? hence, the yield exceeds the coupon. B. The? bond's coupon yield is irrelevant. It trades at a discount because investors avoid these bonds. C. Because the value of the bond is? discounted, the return on the bond is reduced and the yield exceeds...

  • 6) Which of the following statements is FALSE? A) If the bond trades at a discount,...

    6) Which of the following statements is FALSE? A) If the bond trades at a discount, and investor who buys the bond will earn a return both from receiving the coupons and from receiving a face value that exceeds the price paid for the bond. B) Most coupon bond issuers choose a coupon rate so that the bonds will initially trade at, or very near to, par. C) Coupon bonds always trade for a discount. D) At any point in...

  • 9.Which of the following statements is​ FALSE? A. Most coupon bond issuers choose a coupon rate...

    9.Which of the following statements is​ FALSE? A. Most coupon bond issuers choose a coupon rate so that the bonds will initially trade​ at, or very near​ to, par. B. If the bond trades at a​ discount, and investor who buys the bond will earn a return both from receiving the coupons and from receiving a face value that exceeds the price paid for the bond. C. At any point in​ time, changes in market interest rates affect a​ bond's...

  • 3) What is the relationship between the coupon rate of a bond and the yield to...

    3) What is the relationship between the coupon rate of a bond and the yield to maturity in terms of the bond's price. In particular, when do we have a discount bond, a par bond, and a premium bond? Please explain the rational behind the relationship as if you are explaining this relationship to a novice of Finance.

  • If a bond's coupon rate is smaller than the yield to maturity, then a) Not enough...

    If a bond's coupon rate is smaller than the yield to maturity, then a) Not enough information b) The face value payment must equal the initial purchase cost c) The face value payment must exceed the initial purchase cost d) The face value payment must fall short of the initial purchase cost Which of the following bonds is different than the others? a) (-90, 15, 15, 15, 105) b) (-18, 3, 3, 3, 21) c) (-45, 7.5, 7.5, 7.5, 50)...

  • 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...

  • 7.) The yield to maturity of a $ 1,000 bond with a 6.7 % coupon​ rate,...

    7.) The yield to maturity of a $ 1,000 bond with a 6.7 % coupon​ rate, semiannual​ coupons, and two years to maturity is 7.7 % ​APR, compounded semiannually. What is its​ price? The price of the bond is ​$ __ 8.) Suppose a​ ten-year, $ 1 comma 000 bond with an 8.4 % coupon rate and semiannual coupons is trading for $ 1 comma 035.89. a. What is the​ bond's yield to maturity​ (expressed as an APR with semiannual​...

  • A bond with an annual coupon rate of 4.0% sells for $955. What is the bond's current yield? (Round your answer to 2...

    A bond with an annual coupon rate of 4.0% sells for $955. What is the bond's current yield? (Round your answer to 2 decimal places.) Current yield

  • A bond with an annual coupon rate of 4% sells for $829. What is the bond's...

    A bond with an annual coupon rate of 4% sells for $829. What is the bond's current yield? (answer in percentage points)

  • A bond with an annual coupon rate of 4.3% sells for $995. What is the bond's...

    A bond with an annual coupon rate of 4.3% sells for $995. What is the bond's current yield? Round your answer to 2 decimal

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT