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Which bond has the lowest price risk?
Bond Coupon rate Maturity
A 7% 10
B 6% 15
C 5% 12
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- Which of the following is the correct ranking for the bond price? Bond Coupon rate Maturity YTM A 6% 8 6.5% B 6% 8 7% C 7% 7 6.5% 1.A > B > C 2.B > C > A 3.C > A > B Please answer fast I give you upvote.Which bond has a higher price risk, bond W or bond X? Why?Which bond has a higher price risk, bond Y or bond Z? Why?Which bond has a higher price risk, bond W or bond Y? Why?Which bond has a higher price risk, bond X or bond Z? Why ? Bond Coupon Rate Maturity YTM=6% YTM=7% %Change YTM=5% %ChangeW 4% 10 852.79 789.29 -7.45 922.78 16.91X 8% 10 1147.20 1070.24 -6.71 1231.65 15.08Y 4% 30 724.70 627.75 -13.38 846.27 34.85Z 8% 30 1275.29 1124.09 -11.86 1461.17 29.99TB TF Qu. 3-30 The yield to maturity on a bond is really... The yield to maturity on a bond is really its internal rate of return. True or False True False
- Which bond in the table is has a higher price? Bond yield coupon A 5% 6% B 5% 4% Select one: a. not enough information to determine b. Both Bond A and Bond B c. Bond B d. Bond AConsider the following pair of bonds which are alike except for the characteristics listed. Bond A Bond B Coupon rate 6% 5% Callable No Yes Discuss which bond should have the higher yield to maturityQUESTION EIGHTa) What is the relationship between the price of a bond and its YTM? b) Explain why some bonds sell at a premium over par value while other bonds sell at a discount.What do you know about the relationship between the coupon rate and the YTM for premiumbonds? What about for discount bonds? For bonds selling at par value? c) What is the relationship between the current yield and YTM for premium bonds? For discountbonds? For bonds selling at par value? SEBO PLC just paid a dividend of K2.75 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on SEBO stock is 13 percent, what will a share of stock sell for today?
- Ceteris paribus, which of the following bonds has the greatest price risk? Group of answer choices a bond with 10% coupon rate a bond with 8% coupon rate a bond with 5% coupon rate a zero coupon bondLooking at the bond issue selected, why are the current yield and yield to maturity numbers different? Briefly explain in words the difference between these two terms.Question 4 Which of the following is the correct ranking for the bond price? Bond Coupon Rate A B C A>B>C B> C>A C> A > B 6% 6% 7% Maturity (years) 8 8 7 YTM 6.5% 7% 6.5%
- Why would à cofmpally LO 2 6.15 Bond Prices versus Yields What is the relationship between the price of a bond and its YTM? b. Explain why some bonds sell at a premium over par value while other bonds sell at a discount. What do you know about the relationship between the coupon rate and the YTM for premium bonds? What about for discount bonds? For bonds selling at par a. value? What is the relationship between the current yield and YTM for premium bonds? For discount bonds? For bonds selling at par с. value?Question 3. A fixed rate bond with notional 1 pays annual coupons of c at times T1, T2, . . . , Tn where Ti+1 = Ti + 1 and notional 1 at time Tn. a) Write down the bond price BFXD c (t) at time t ≤ T0 in terms of ZCBs. b) Suppose t = T0 = 0. The yield of the bond is defined as the value Y such that B FXD c (0) = Xn i=1 c (1 + Y ) i + 1 (1 + Y ) n , that is, the rate at which IRR discounting gives the bond price. By summing a geometric series, show that BFXD c (0) = 1 if and only if Y = c. c) By writing a swap as the difference between a fixed rate bond and a floating rate bond, show that BFXD c (0) = 1 if and only if c = y0[0, Tn]. Remark 1. This exercise shows that the T-year spot swap rate is the bond coupon such that a T-maturity bond has price par, that is 100% of notional.5. Which one of the following bonds has the lowest interest rate risk? A. 8-year, zero coupon B. 8-year, 8% coupon C. 16-year, zero coupon D. 16-year, 8% coupon