For each of the following pairs of Treasury securities (each with $1,000 par value), identify which will have the higher price: a. A three-year zero-coupon bond or a five-year zero-coupon bond? b. A three-year zero-coupon bond or a three-year 4% coupon bond? c. A two-year 5% coupon bond or a two-year 6% coupon bond? a. A three-year zero-coupon bond or a five-year zero-coupon bond? Which will have the higher price? (Select the best choice below.) OA. A three-year zero-coupon bond, because the future value is received sooner and the present value is higher. OB. A five-year zero-coupon bond, because the present value is received sooner and the future value is higher. OC. A three-year zero-coupon bond, because the present value is received sooner and the future value is higher. OD. A five-year zero-coupon bond, because the future value is received later and the present value is higher.
For each of the following pairs of Treasury securities (each with $1,000 par value), identify which will have the higher price: a. A three-year zero-coupon bond or a five-year zero-coupon bond? b. A three-year zero-coupon bond or a three-year 4% coupon bond? c. A two-year 5% coupon bond or a two-year 6% coupon bond? a. A three-year zero-coupon bond or a five-year zero-coupon bond? Which will have the higher price? (Select the best choice below.) OA. A three-year zero-coupon bond, because the future value is received sooner and the present value is higher. OB. A five-year zero-coupon bond, because the present value is received sooner and the future value is higher. OC. A three-year zero-coupon bond, because the present value is received sooner and the future value is higher. OD. A five-year zero-coupon bond, because the future value is received later and the present value is higher.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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For each of the following pairs of Treasury securities (each with $1,000 par value), identify which will have the higher price:
a. A three-year zero-coupon bond or a five-year zero-coupon bond?
b. A three-year zero-coupon bond or a three-year 4% coupon bond?
c. A two-year 5% coupon bond or a two-year 6% coupon bond?
F
a. A three-year zero-coupon bond or a five-year zero-coupon bond?
Which will have the higher price? (Select the best choice below.)
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OA. A three-year zero-coupon bond, because the future value is received sooner and the present value is higher.
OB. A five-year zero-coupon bond, because the present value is received sooner and the future value is higher.
OC. A three-year zero-coupon bond, because the present value is received sooner and the future value is higher.
OD. A five-year zero-coupon bond, because the future value is received later and the present value is higher.
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