mc attached Which of the following statements is true?When investors' required rate of return is less than the bond's coupon rate, then market value of the bond will be greaterthan face value.a.O b.When investors' required rate of return exceeds the bond's coupon rate, then the market value of the bond will be greaterthan face value.When investors' required rate of return is less than the bond's coupon rate, then the market value of the bond will be lessthan face value.O d.When investors' required rate of return equals the bond's coupon rate, then the market value of the bond may be sellingat face value.C.

The coupon rate is the fixed annual rate at which a guaranteed-income security, typically a bond,…

Answered: Which of the following statements is…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 9QTD

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1. Which of the following is correct? Group of answer choices 1. The lower the price you pay for a bond, the greater is your return. 2. A bond is overpriced when its value is greater than its price. 3. A fairly priced bond has a price equal to its face. 4. The value of a bond can be determined by the present value of all coupon payments and the present value of principal payment at maturity date.
If a bond’s coupon rate is greater than the investor’s required rate of return on the bond, would the bond’s price be greater than or less than its par value? Explain.
Does it make any difference if the coupon rate on a bond is more than the needed rate of return on the bond, as long as the required rate of return is greater than the coupon rate? Explain.
What will be the price of a bond in which the YTM is higher than the coupon rate? a. Below face value b. At face value c. Above face value d. Cannot be determined
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 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.
Coupon payments are fixed, but the percentage return that investors receive varies based on market conditions. This percentage return is referred to as the bond's yield. Yield to maturity (YTM) is the rate of return expected from a bond held until its maturity date. However, the YTM equals the expected rate of return under certain assumptions. Which of the following is one of those assumptions? O The bond is callable. O The probability of default is zero. Consider the case of Demed Inc.: Demed Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $950.35. However, Demed Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on Demed Inc.'s bonds? Value YTM YTC If interest rates are expected to remai constant, what is the best estimate of the remaining life left for Demed Inc.'s bonds? O 5 years O 13 years O 18 years O 8 years…
What is a bond’s market value when the required rate of return (ie market rate) is less than the coupon rate? The bond’s market value is less than the par value. The bond’s market value is the same as the par value. The bond’s market value is greater than the par value. None of the above.
2. For cach of the following situation, identify whether a bond would be considered a premium bond, a discounted bond, or a par bond. a. A bond's current market price is greater than its face value. b. A bond's coupon rate is equal to its yield to maturity. c. A bond's coupon rate is less than its required rate of return. d. A bond's coupon rate is less than its yield to maturity. e. A bond's coupon rate is greater than its yield to maturity. f. A bond's fair present value is less than its face value. Answer: a. ..... b. с. d. e. f.
Describe the differences between the yield to maturity (YTM) and the yield to call (YTC) on a bond. Why would the return to the investor be different if a bond is called? Justify your answer
Given that market interest rates is higher then bond's coupon rate, the bond will: sell for less than par value. sell for more than par value. decrease its coupon rate. increase its coupon rate.
e. If the bondholder’s required rate of return equals the coupon interest rate, the bondwill sell at _________.

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