Homework Help is Here – Start Your Trial Now!
Business
Finance
a. A three-year zero-coupon bond or a five-year zero-coupon bond? b. A three-year zero-coupon bond or a three-year 4% coupon bond? c. A two-year 5% coupon bond or a two-year 6% coupon bond?

a. A three-year zero-coupon bond or a five-year zero-coupon bond? b. A three-year zero-coupon bond or a three-year 4% coupon bond? c. A two-year 5% coupon bond or a two-year 6% coupon bond?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question

Hello please help and make sure its correct please i will rate you

For each of the following pairs of Treasury securities (each with $1,000 par value), identify which will have the higher price: a. A three-year zero-coupon bond or a five-year zero-coupon bond? b. A three-year zero-coupon bond or a three-year 4% coupon bond? c. A two-year 5% coupon bond or a two-year 6% coupon bond? a. A three-year zero-coupon bond or a five-year zero-coupon bond? Which will have the higher price? (Select the best choice below.) O A. A three-year zero-coupon bond, because the present value is received sooner and the future value is higher. O B. A five-year zero-coupon bond, because the future value is received later and the present value is higher. OC. A three-year zero-coupon bond, because the future value is received sooner and the present value is higher. O D. A five-year zero-coupon bond, because the present value is received sooner and the future value is higher. b. A three-year zero-coupon bond or a three-year 4% coupon bond? Which will have the higher price? (Select the best choice below.) O A. Since they both have a three-year maturity, they are equal in price. B. The three-year 4% coupon bond, because the 4% coupon bond pays interest payments; whereas the zero-coupon bond is a pure discount bond. O C. The three-year zero-coupon bond, because the zero-coupon bond is risk-free. D. The three-year zero-coupon bond, because a pure discount bond pays higher interest payments than a 4% coupon bond. c. A two-year 5% coupon bond or a two-year 6% coupon bond? Which will have the higher price? (Select the best choice below.) O A. Because they are both two-year coupon bonds, they are equal in price. O O B. The two-year 6% coupon bond, because the coupon (interest) payments are higher, even though the timing is the same. C. The two-year 5% coupon bond, because the coupon (interest) payments are higher, even though the timing is the same. D. The two-year 5% coupon bond, because the future value will be received sooner, therefore the present value must be higher.
Transcribed Image Text:For each of the following pairs of Treasury securities (each with $1,000 par value), identify which will have the higher price: a. A three-year zero-coupon bond or a five-year zero-coupon bond? b. A three-year zero-coupon bond or a three-year 4% coupon bond? c. A two-year 5% coupon bond or a two-year 6% coupon bond? a. A three-year zero-coupon bond or a five-year zero-coupon bond? Which will have the higher price? (Select the best choice below.) O A. A three-year zero-coupon bond, because the present value is received sooner and the future value is higher. O B. A five-year zero-coupon bond, because the future value is received later and the present value is higher. OC. A three-year zero-coupon bond, because the future value is received sooner and the present value is higher. O D. A five-year zero-coupon bond, because the present value is received sooner and the future value is higher. b. A three-year zero-coupon bond or a three-year 4% coupon bond? Which will have the higher price? (Select the best choice below.) O A. Since they both have a three-year maturity, they are equal in price. B. The three-year 4% coupon bond, because the 4% coupon bond pays interest payments; whereas the zero-coupon bond is a pure discount bond. O C. The three-year zero-coupon bond, because the zero-coupon bond is risk-free. D. The three-year zero-coupon bond, because a pure discount bond pays higher interest payments than a 4% coupon bond. c. A two-year 5% coupon bond or a two-year 6% coupon bond? Which will have the higher price? (Select the best choice below.) O A. Because they are both two-year coupon bonds, they are equal in price. O O B. The two-year 6% coupon bond, because the coupon (interest) payments are higher, even though the timing is the same. C. The two-year 5% coupon bond, because the coupon (interest) payments are higher, even though the timing is the same. D. The two-year 5% coupon bond, because the future value will be received sooner, therefore the present value must be higher.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Effect Of Interest Rate
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS