FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Over the term of the bonds, the amount of unamortized discount will
a. be unaffected until the bonds mature.
b. decrease.
c. fluctuate up and down if the market is volatile.
d. increase.
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- The longer the term a bond has before it matures, ______________ will be the affect on its value due to a 1% change in market interest rates. Select one: a. The lower b. Either A or B depending on the direction of the interest change c. Neither A or B, since bond maturity has no impact on interest rate sensitivity. d. The greaterarrow_forwardHistorical evidence indicates that stocks Seleccione una: a. underperform bonds. b. outperform bonds. C. Are less risky than bonds. d. have the same return as bonds.arrow_forwardA bond will sell at a premium when its coupon interest rate: is lower than the market interest rate on similar bonds. O exceeds the market interest rate on similar bonds. O varies more than the market interest rate on similar bonds. O equals the market interest rate on similar bonds.arrow_forward
- As the price of a bond □ a. rises; rises Ob. falls; falls c. rises; falls O d. falls; rises and the expected return , bonds become more attractive to investors and the quantity demanded rises.arrow_forwardAll else the same, a will decrease the required return on a bond. Select one: O a. sinking fund O b. increase in the size of a bond issuance O c. lower bond rating O d. call provision O e. increase in inflationarrow_forwardThe time value of money is used in calculating bond prices because: Group of answer choices A - The company might choose to repay the bonds prior to their maturity date B - Bond investors receive future payments and purchase bonds with current dollars C - The amount to be repaid at maturity will change as market rates change D - Cash interest payments to bondholders will change as market rates changearrow_forward
- Which of the following statements is TRUE regarding bonds? O A. At maturity, lenders repay a bond's par value to borrowers. O B. Ceteris paribus, bonds with higher YTMS would have higher prices. c. Borrowers purchase bonds. O D. If you anticipate a decline in market interest rates, you should purchase long-term zero-coupon bonds.arrow_forward5. The estimated percentage change in the value of a bond derived from the duration rule is A) less than the actual price change when the yield decreases B) less than the actual price change when the yield increases C) greater than the actual price change when the yield decreases D) always greater than the actual price changearrow_forwardA bond’s expected return is sometimes estimated by its yield to maturity (YTM) and sometimes by its yield to call (YTC). The YTC is a better estimate when the bond sells at... a. a discount. b. a premium. c. par value.arrow_forward
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