Please explain why this statement is (False). Ignoring default risk, if a bond's expected return is greater than its required return, then the bond's market price must be greater than the present value of the bond's cash flows.
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Please explain why this statement is (False).
Ignoring default risk, if a bond's expected return is greater than its required return, then the
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- Money duration is the appropriate measure of interest rate risk for bonds with embedded options. Select one: True FalseDuration is a measurement of a bond’s interest rate risk. It is also referred to as the responsiveness or sensitivity of a bond’s full price to a change in its yield. Select one: True FalseThe risk that a bond cannot be sold since the issuer is not well known is called: a.default risk b.interest rate risk c.inflation risk d.liquidity risk
- Briefly explain the following statement: Although long-term bonds are heavily exposedto interest rate risk, short-term T-bills are heavily exposed to reinvestment rate risk. Thematurity risk premium reflects the net effects of those two opposing forces.Explain the differences between a bond's yield to maturity (YTM) and its yield to call (YTC). Is there a reason why the return to the investor would alter if a bond is called? Please provide justification for your response.Which of the following statements is false? A. Other things being equal, an increase in a bond’s maturity will increase its interest rate risk. B. Other things being equal, an increase in the coupon rate of a bond will decrease its interest rate risk. C. Other things being equal, an increase in a bond’s YTM will decrease its interest rate risk. D. Effective duration is calculated as Macaulay duration divided by one plus the bond’s yield to maturity.
- Which of the follwing statement is correct. As the credit risk of a bond increases: The YTM falls and price of the bond falls The YTM increases and price of the bond falls The YTM falls and price of the bond rises The YTM increases and price of the bond rises unansweredWhich of the following statements is/are most CORRECT? O 11 A yield curve depicts the relationship between bond's 'time to maturity and its yield to maturity. 2) A premium bond's price will decline over time if the required return remains unchanged. 3) A discount bond's price will decline over time if the required return remains unchanged. 4) Both a and b are correct.1. "If the bonds of different maturities are perfectly substitute, their interest rates are more likely to move together". Is this statement true or false or uncertain? Discuss using theory of expectation. Note: Your answers should be detailed with proper references.
- 1. A bond call price amount is a. lower than the par value b. higher than the par value c. lower than the discount value 2. Risk of losing a market due to forex change. a. economic risk b. market risk c. transaction riskWhy does the market value differ from its par value when the coupon interest rate does not equal the market yield to maturity on a comparable-risk bond?Under what situation might a bond discount arise when issuing bonds? Select one: a. The coupon rate is less than the effective or yield rate. b. The effective or yield rate is less than the coupon rate. c. The coupon rate is less than the cash rate of interest. d. The effective or yield rate is less than the market rate of interest.