Liquid yield option notes or LYONS have which of the following characteristics? I. convertibility at a fixed conversion ratio II. high coupon rates III. a put feature that guarantees the right to redeem the bonds at a prespecified price IV. convertibility at a fixed conversion price I and III only II and IV only I and IV only II and III only

Liquid yield option notes or LYONS have which of the following characteristics? I. convertibility at a fixed conversion ratio II. high coupon rates III. a put feature that guarantees the right to redeem the bonds at a prespecified price IV. convertibility at a fixed conversion price I and III only II and IV only I and IV only II and III only

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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Check all that are true with respect to the yield to maturity (YTM) and the expected return for a bond. Group of answer choices The expected return is based on the contractly obligated payments whereas the YTM is based on what the investors expect to receive The YTM is based on the promised payments whereas the expected return is based on the expected cash flows Higher YTMs always mean higher expected returns In the presence of non-zero default risk, the YTM will be higher than the expected return YTM is just another name for the expected return
For a premium bond, the: Multiple Choice O current yield is equal to the coupon rate but less than the yield to maturity. O yield to maturity exceeds both the coupon rate and the current yield. O coupon rate is equal to the yield to maturity but less than the current yield. current yield is less than either the coupon rate or the yield to maturity. coupon rate exceeds both the yield to maturity and the current yield.
Under what situation might a bond discount arise when issuing bonds? Select one: a. The coupon rate is less than the effective or yield rate. b. The effective or yield rate is less than the coupon rate. c. The coupon rate is less than the cash rate of interest. d. The effective or yield rate is less than the market rate of interest.
All of the following are credit derivatives except: Group of answer choices C. Spread options D. Credit-linked notes B. Credit default swaps (CDS) A. Remics
How does the price-yield relationship for a callable bond compare to the same relationship for an option-free bond? The price-yield relationship is best described as exhibiting: negative convexity at low yields for the callable bond and positive convexity for the option-free bond the same convexity for both bond types negative convexity for the callable bond and positive convexity for an option- free bond
Give typing answer with explanation and conclusion Question 16: Which of the following statements about convexity are true? I. Convexity accounts for the curvilinear function of bond rates II. A bond with a very low coupon and a long maturity will have low convexity III. A bond investor would seek to avoid bonds with high convexity. IV. Convexity is defined as the rate of change of the slope of the price/yield curve V. There is an inverse relationship between maturity and convexity a. I. b. II. III. IV. c. I. IV. d. II. IV. V. e. I. II. IV. V.
1.If the coupon rate is less than the market rate, the bond will be a: Group of answer choices A. premium bond B. discount bond C. at par bond 2.If the coupon rate is greater than the market rate, the bond will be a: A. premium bond B. discount bond C. at par bond 3. If the price of the bond is greater than the par value, then the bond is a: A. premium bond B. discount bond C. at par bond 4.Company X is issuing bonds. They plan to issue 10,000, $1000 par, 7% bonds that pay semi-annual for 5 years. If the price per bond is $1020, what is the market annual rate-of-return? (percentage, 2 decimals, e.g. xx.xx)
With regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity attempts to capture the sensitivity of a bond’s duration to changes in interest rates. D. Both B & C B. Duration is related to yield approximation and convexity is related to price. A. Convexity is related to yield approximation and duration is related to price
Duration Multiple Choice is a direct comparison between bond issues with different levels of risk. assesses the time element of bonds in terms of both coupon and term to maturity and is a direct comparison between bond issues with different levels of risk. assesses the time element of bonds in terms of both coupon and term to maturity and allows structuring a portfolio to avoid interest-rate risk. assesses the time element of bonds in terms of both coupon and term to maturity. allows structuring a portfolio to avoid interest-rate risk.
A bond’s expected return is sometimes estimated by its yield to maturity (YTM) and sometimes by its yield to call (YTC). The YTC is a better estimate when the bond sells at... a. a discount. b. a premium. c. par value.
If a bond's yield to maturity increases, then what happens to current yield? Group of answer choices Not enough information No change Decrease Increase
1. (T/F) A putable bond will have a higher coupon than a bond without a put option, assuming both have the same maturity and risk profile

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