Suppose a bond sells at a premium to par value. This implies the bond is a good investment the bond has a built-in capital gain the bond has as built-in capital loss the bond is a bad investment
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- 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 riskA premium bond is a bond that sells for less than its par value. O True FalseInvestment grade bonds have a risk of default and rated or above, while junk bonds have risk of default and are rated or below. O low, BBB, high, BB O high, BBB, low, BB O low, B, low, CCC O low, A, high, BBB
- 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 unansweredAll else equal, the holder of a fairly priced premium bond must expect a capital loss over the holding period. True or False True FalseExplain the use of a sinking-fund provision. How can it reduce the investor’s risk? What are protective covenants? Why are they needed? Explain the use of call provisions on bonds. How can a call provision affect the price of a bond? Explain the use of bond collateral, and identify the common types of collateral for bonds. What are debentures? How do they differ from subordinated debentures? What is a bond indenture? What is the function of a trustee with respect to the bond indenture? What are the advantages and disadvantages to a firm that issues low- or zero-coupon bonds?
- When a bond sells at a discount, the carrying value ________ after each amortization entry. A. increases B. decreases C. stays the same D. cannot be determinedWhich of the follwing statement is correct. As the credit risk of a bond increases: A. The YTM falls and price of the bond falls B. The YTM increases and price of the bond falls C. The YTM falls and price of the bond rises D. The YTM increases and price of the bond risesThe relationship between bond prices and the interest rate bonds pay: Seleccione una: a. is Positive O b. depends on stock prices c. is unrelated d. is inverse or negative
- Which of the following statements is CORRECT? O All else constant, par value bonds have positive capital gains. All else constant, premium bonds have zero capital gains. All else constant, premium bonds have positive capital gains. All else constant, discount bonds have positive capital gains.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.Why does a bond’s par or face value differ from its market value? Cite your references