Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have the same maturity, a face value of $1,000, and an 8% yield to maturity. Which of the following statements is CORRECT? a) Bond A trades at a discount and Bond B trades at a discount too. b) If the yield to maturity for both bonds remains at 8%, Bond A's price one year from now will higher than it is today, but Bond B's price one year from now will be lower than it is today. c) Bond B trades at a discount, whereas Bond A trades at a premium. d) Bond A trades at a discount, whereas Bond B trades at a premium. e) Both bonds trade at par value. f) If the yield to maturity for both bonds immediately decreases to 6%, Bond A's bond will have a larger percentage increase in value. g) Bond A trades at a premium and Bond B trades at a premium too.

Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have the same maturity, a face value of $1,000, and an 8% yield to maturity. Which of the following statements is CORRECT? a) Bond A trades at a discount and Bond B trades at a discount too. b) If the yield to maturity for both bonds remains at 8%, Bond A's price one year from now will higher than it is today, but Bond B's price one year from now will be lower than it is today. c) Bond B trades at a discount, whereas Bond A trades at a premium. d) Bond A trades at a discount, whereas Bond B trades at a premium. e) Both bonds trade at par value. f) If the yield to maturity for both bonds immediately decreases to 6%, Bond A's bond will have a larger percentage increase in value. g) Bond A trades at a premium and Bond B trades at a premium too.

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

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Bond A has a 9% annual coupon while Bond B has a 6% annual coupon. Both bonds have a 7% yield to maturity, and the YTM is expected to remain constant. Which of the following statements is CORRECT? a. The prices of both bonds will remain unchanged. b. The price of Bond A will decrease over time, but the price of Bond B will increase over time. c. The prices of both bonds will increase by 7% per year. d. The prices of both bonds will increase over time, but the price of Bond A will increase by more. e. The price of Bond B will decrease over time, but the price of Bond A will increase over time. Please explain and show work in excel
Bond X has a 10% annual coupon, while Bond Y has a 8% annual coupon. Both bonds have the same maturity, a face value of $1,000, an 9% yield to maturity, and are noncallable. Which of the following statements is CORRECT? options: a) Bond X's capital gains yield is greater than Bond Y's capital gains yield. b) Bond X trades at a discount, whereas Bond Y trades at a premium. c) If the yield to maturity for both bonds immediately decreases to 7%, Bond X's bond will have a larger percentage increase in value. d) Bond X's current yield is greater than that of Bond Y. e) If the yield to maturity for both bonds remains at 9%, Bond X's price one year from now will be higher than it is today, but Bond Y's price one year from now will be lower than it is today.
One bond has a coupon rate of 7.4%, another a coupon rate of 9.2%. Both bonds pay interest annually, have 11-year maturities, and sell at a yield to maturity of 8.0%. a. If their yields to maturity next year are still 8.0%, what is the rate of return on each bond? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) b. Does the higher-coupon bond give a higher rate of return over this period?
Bond A is a 20-year Treasury bond has a 12% annual coupon, while Bond B is a 25-year T-bond has an 8% annual coupon. Both bonds have a 11% yield to maturity. Which statement is correct? Group of answer choices Both A nd B will sell at par. A will sell at discount and B will sell at premium. If interest rates decline, the prices of both bonds will increase, but Bond B would have a larger percentage increase in price. If interest rates increase, the prices of both bonds will increase, but Bond B would have a smaller percentage increase in price.
Bond P is a premium bond with a coupon rate of 8.9 percent. Bọnd D is a discount bond with a coupon rate of 4.9 percent. Both bonds make annual payments, have a YTM of 6.9 percent, have a par value of $1,000, and have fourteen years to maturity. a. What is the current yield for Bond P? For Bond D? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond P? For Bond D? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g.., 32.16.) Bond P Bond D a. Current yield % b. Capital gains yield
Bond P is a premium bond with a coupon rate of 8 percent. Bond D is a discount bond with a coupon rate of 3 percent and is currently selling at a discount. Both bonds make annual payments, have a YTM of 5 percent, and have eight years to maturity.1. What is the current yield for bond P and D?2. If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P and bond D?
Godo
A General Power bond carries a coupon rate of 8.2%, has 9 years until maturity, and sells at a yield to maturity of 7.2%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What will happen to the bond price if the yield to maturity falls to 6.2%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. If the yield to maturity falls to 6.2%, will the current yield be less, or more, than the yield to maturity?
A General Power bond carries a coupon rate of 9.2%, has 9 years until maturity, and sells at a yield to maturity of 8.2%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. What will happen to the bond price if the yield to maturity falls to 7.2%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. A a. Interest payments b. Price c. Price will by
Bond A is a premium bond with a 9 percent coupon. Bond B is a 5 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 6 percent, and have five years to maturity. The face value is $1000 for both bonds. a. Why is the capital gain yield of the premium bond different from that of the discount bond? Which bond is better in terms of yields? b. What is the holding period return for each bond, if both bonds are held over the next year and sold at the year ned?
A bond currently sells for 1,200, which gives it a yield to maturity of 8%. Suppose that if the yield increases by 25 basis points, the price of the bond declines to 1,155. Based on this price change, what is the duration of the bond? How do i calculate this?
Suppose the yield on a one year bond is currently 2.5%. Further assume that the expected yield on a one-yea the next four years are, respectively: 2.4%, 2.3%, 2.2%, and 2.1%. Additionally, the term premium on the one-, three-, four-, and five-year bonds are given in the table below: Term Premium on Different Maturity Length Bonds Maturity Length Term Premium one-year 0.00% two-year three-year four-year five-year a. b. flat 0.05% Given the information above, if the yield curve of these five bonds were graphed, it would be 0.10% e. 0.15% downward sloping upward sloping 0.20% C. flat then upward sloping d. upward sloping then downward sloping

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