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
Related questions
Question
![[Related to the Apply the Concept: "How to Follow the Bond Market: Reading the Bond Tables ] Consider the following information on two U.S. Treasury
bonds
Maturity
July 31, 2024
Coupon
1.625
July 31, 2024
2.000
Briefly explain how two securities that have the same yield to maturity can have different asked prices
OA. Bond A has a low coupon rate and a lower price. Bond B has a higher coupon rate and a higher price. Because of the bond price formula, if coupon rates
rise, the yield will fall, which requires prices to fall to keep the yield the same. If both bonds have the same risk profile, the law of one price brings bond
yields to the same level
Bond A
Bond B
Bid
101.8984
103.4141
Asked
101.9141
103.4297
Chg
0:5000
0.5000
Asked yield
1.151
1.151
OB. Bond A has a low coupon rate and a lower price. Bond B has a higher coupon rate and a higher price, Because of the bond price formula, if coupon rates
fall, the yield will rise, which requires prices to rise to keep the yield the same. If both bonds have the same risk profile, the law of one price brings bond
yields to the same level
OC. Bond A has a low coupon rate and a lower price. Bond B has a higher coupon rate and a higher price. Because of the bond price formula, if coupon rates
fall, the yield will fall, which requires prices to fall to keep the yield the same. If both bonds have the same risk profile, the law of one price brings bond
yields to the same level
OD. Bond A has a low coupon rate and a lower price Bond B has a higher coupon rate and a higher price. Because of the bond price formula, if coupon rates
fall, the yield will fall, which requires prices to fall to keep the yield the same. If the two bonds have different risk profiles, the law of one price brings bond
yields to the same level](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F32e2663c-ed84-46cb-92be-e258c162a626%2F04caff8a-1660-453a-a3fb-e209d490b9e1%2Fbn42vsf_processed.jpeg&w=3840&q=75)
Transcribed Image Text:[Related to the Apply the Concept: "How to Follow the Bond Market: Reading the Bond Tables ] Consider the following information on two U.S. Treasury
bonds
Maturity
July 31, 2024
Coupon
1.625
July 31, 2024
2.000
Briefly explain how two securities that have the same yield to maturity can have different asked prices
OA. Bond A has a low coupon rate and a lower price. Bond B has a higher coupon rate and a higher price. Because of the bond price formula, if coupon rates
rise, the yield will fall, which requires prices to fall to keep the yield the same. If both bonds have the same risk profile, the law of one price brings bond
yields to the same level
Bond A
Bond B
Bid
101.8984
103.4141
Asked
101.9141
103.4297
Chg
0:5000
0.5000
Asked yield
1.151
1.151
OB. Bond A has a low coupon rate and a lower price. Bond B has a higher coupon rate and a higher price, Because of the bond price formula, if coupon rates
fall, the yield will rise, which requires prices to rise to keep the yield the same. If both bonds have the same risk profile, the law of one price brings bond
yields to the same level
OC. Bond A has a low coupon rate and a lower price. Bond B has a higher coupon rate and a higher price. Because of the bond price formula, if coupon rates
fall, the yield will fall, which requires prices to fall to keep the yield the same. If both bonds have the same risk profile, the law of one price brings bond
yields to the same level
OD. Bond A has a low coupon rate and a lower price Bond B has a higher coupon rate and a higher price. Because of the bond price formula, if coupon rates
fall, the yield will fall, which requires prices to fall to keep the yield the same. If the two bonds have different risk profiles, the law of one price brings bond
yields to the same level
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