an investment in a coupon bond will provide the investor with a return equal to the bond's yield to maturity at the time of purchase if:The bond is not called for redemption at a price that exceeds its par value
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an investment in a coupon bond will provide the investor with a return equal to the bond's yield to maturity at the time of purchase if:
The bond is not called for redemption at a price that exceeds its par value
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- a. An investment in a coupon bond will provide the investor with a return equal to the bond’s yield to maturity at the time of purchase if:i. The bond is not called for redemption at a price that exceeds its par value.ii. All sinking fund payments are made in a prompt and timely fashion over the life of the issue.iii. The reinvestment rate is the same as the bond’s yield to maturity and the bond is held until maturity.iv. All of the above.b. A bond with a call feature:i. Is attractive because the immediate receipt of principal plus premium produces a high return.ii. Is more apt to be called when interest rates are high because the interest savings will be greater.iii. Will usually have a higher yield to maturity than a similar noncallable bond.iv. None of the above.c. In which one of the following cases is the bond selling at a discount?i. Coupon rate is greater than current yield, which is greater than yield to maturity.ii. Coupon rate, current yield, and yield to maturity are all the…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.how will the modified duretion of a floating coupon bond be compared to the modified duration of a fixed rate coupon bond? (same, higher or lower?) (floating coupon adjust coupon accotding to interest rate level, ie higher interest rate results in higher coupon payment)
- 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? The bond has an early redemption feature. The bond will not be called.1. A “buy-and-hold” investor purchases a fixed-rate bond at a discount and holds it until it matures. Which of the following least likely contributes to the investor’s total return, assuming all payments are made as scheduled? A. Capital gain B. Principal payment C. Reinvestment of coupon payments D. Coupon incomeCoupon 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? The bond has an early redemption feature. The bond will not be called. Consider the case of BTR Co.: BTR Co. 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 $1,100.35. However, BTR Co. 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 BTR Co.’s bonds? Value YTM YTC If interest rates are expected to remain constant, what is the best estimate of the remaining life left…
- The yield to maturity on a bond a is fixed in the indenture. b is lower for higher-risk bonds. c is the required return on the bond. d is generally equal to the coupon interest rate.A bond will be priced at a discount to par value if its coupon rate is less than its yield-to-maturity (YTM). Select one: True FalseThe market value of a bond will be less than the par value if the market's required yield to maturity is bond is known as a the coupon interest rate. This below; discount bond O above; discount bond below; premium bond above; premium bond Not enough information W
- The method used to value a default-free zero coupon bonds (such as T-bills) requires that the interest is deducted from the face value of the bonds in advance. a.rediscounting b.market price c.forward price d.discount interestExplain 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 correctly describes the relationship between a long-term bond’s market value, its coupon rate and the relevant yield to maturity? A. When bonds are initially issued, the coupon rate is generally set equal to the required yield to maturity so that the company can issue the bonds at their face value. B. If at any point in the bond’s life its coupon rate is less than the market determined yield to maturity, its market value at that time will be less than the face value of the bond. C. More than one of the other statements are correct D. A government bond with a fixed coupon rate may be valued below its’ face value even though the promised cash flows are effectively riskless. E. None of the other statements are correct Is "B" is the correct answer?