A bond has 10 years to maturity, a $1,000 par value, coupon payments of $100, has 5 years to maturity, and is not expected to default. The bond should sell at a premium if market interest rates are below 10%. True False

A bond has 10 years to maturity, a $1,000 par value, coupon payments of $100, has 5 years to maturity, and is not expected to default. The bond should sell at a premium if market interest rates are below 10%. True False

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

A bond has 10 years to maturity, a $1,000 par value, coupon payments of $100, has 5 years to
maturity, and is not expected to default. The bond should sell at a premium if market interest rates
are below 10%.
True
False

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Use the following information to answer the question(s) below. Suppose that a default-risk-free zero-coupon bond with a face value of $100 and 5 years to maturity is currently trading at $60. Another bond with the same face value and time to maturity but at risk of defaulting sells for $30. (If this risky bond defaults, there is a 70% chance that 30% of the face value will be recovered and a 30% chance that 50% of the face value will be recovered.) Also, suppose the spread between the expected zero rates of the two bonds is 5% pa. What must be the default probability of the second bond (risky bond)? Choose the closest answer. O 47.66% 58.82% 37.32% None of the other answers are correct. O 67.23%
A 20-year bond has a coupon rate of 8 percent, and another bond of the same maturity has a coupon rate of 15 percent. If the bonds are alike in all other respects, which will have the greater relative market price decline if interest rates increase sharply? Why?
A $1,000 bond with a coupon rate of 5.7% paid semiannually has five years to maturity and a yield to maturity of 7%. If interest rates rise and the yield to maturity increases to 7.3%, what will happen to the price of the bond? A. fall by $14.37 B. rise by $11.97 C. fall by $11.97 D. The price of the bond will not change.
Bond J has a coupon rate of 5 percent. Bond K has a coupon rate of 15 percent. Both bonds have eight years to maturity, a par value of $1,000, and a YTM of 11 percent, and both make semiannual payments. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. b. If interest rates suddenly fall by 2 percent instead, what is the percentage change in the price of these bonds? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a. Percentage change in price b. Percentage change in price Bond J % % Bond K % %
A treasury bond with $100 maturity face value has a $9 annual coupon, and 15 years left to maturity. What price will the bond sell for assuming that the 15 year yield to maturity in the market is 4%, 9%, and 14% respectively. (Show working out, without the use of external software such as excel or stata) Explain whether the price movements would have been greater or smaller if a 10 year bond had been used rather than a 15 year one without any further calculations.
please dont give me plagiarised answer as it would be cause for downvote and answer all
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
A $1,000 15-year bond reportedly sells for $850.Which of the following assertions is the most likely to be true?a. The yield to maturity of the bond is higher than the coupon rate.b. The bond's price would sit at $850 if the yield to maturity is stable before the bond matures.c. The present yield of a bond is equivalent to the coupon rate.d. Both b and c are true.e. All of the above claims are true.
A 10-year bond with a face value of $1,000 currently sells for $1,110. Which of the following statements is correct? Select one: a. The bond's current yield is equal to its coupon rate. b. The bond's coupon rate exceeds its current yield to maturity. c. None of the given answers is correct. d. The bond's yield to maturity is greater than its coupon rate.
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