Long-term bonds fluctuate more than short-term bonds as interest rates rise, making them a riskier investment. When interest rates rise, bond prices fall. A bond's coupon rate or interest rate determines the annual payment to the issuer. what does this mean?

Q: What is the connection between the interest rate and the price of a fixed coupon bond? Why is this…

A: The cost of bonds issued is attractive. Interest is paid at predetermined intervals. Bondholders are…

Q: Given that market interest rates is higher then bond's coupon rate, the bond will: sell for less…

A: The price of bond is sum of present value of the future cash flow from its coupons and the present…

Q: Why does the yield on a discount bond surpass the coupon rate

A: Introduction:The bond will trade at a discount if the yield to maturity (YTM) exceeds the coupon…

Q: Interest-rate risk results from:   a. Bond prices being fixed over the life of the bond b. Inflation…

A: Interest rate risk refers to the sensitivity of the bond prices to the interest rate changes. There…

Q: As market rates of interest rise, investors move their funds into bonds, thus increasing their price…

A: Market interest rates are based on the market conditions. It gets affected with the market inflation…

Q: Since bonds always come with a coupon rate, why is it still important to check the yield to maturity…

A: Bonds pay periodic coupons which is calculated as a percentage of the face value of the bond. It is…

Q: Price of short-term bond are less volatile than long-term bonds. But yield to maturity of long-term…

A:

Q: When it comes to bonds, why is yield to maturity more essential than coupon rate?

A: Yield to Maturity, or YTM, is a discount rate that provides discounted future coupons and redemption…

Q: Which type of bond is likely to pay a coupon payment that is varying (i.e. it changes over time) ? O…

A: Bonds act as long-term debt for the issuer as the issuer is under the obligation to pay regular…

Q: Why does the yield of a bond that trades at a discount exceeds the bond’s coupon rate?

A: Where yield to maturity(YTM) is exceed coupon rate payable on bond, the bond will trade at discount.…

Q: Why is it an interest rate risk when investing in long-term bonds?

A: Long-term bonds are those bonds that have the longest maturity offering from U.S. Treasury.…

Q: For the holder of a fixed-rate coupon bond, reinvestment risk is a bigger problem during a period of…

A: Fixed rate bonds are a type of bond which pays a fixed periodic coupon calculated on the face value…

Q: How are investors of zero-coupon bonds compensated for making such an investment?   A. Such bonds…

A: Bond are debt instruments issued by companies. Zero coupon bonds, as the name indicates, do not pay…

Q: nd purchasers expect interest ra

A: Liquidity premium theory gives an idea about the interest rate in the future whether it would…

Q: Describe the relationship between bond prices and inclation. would you be more inclined to buy bonds…

A: Bond prices have an inverse relation o interest rates. When the interest rates increase, the bond…

Q: A corporate bond's return becomes less uncertain as default risk increases.   True or False.…

A: A bond is a financial instrument that represents a loan made by an investor to a borrower (usually a…

Q: When the interest rate on newly issued bonds increases, the price of existing bonds: Group of…

A: Bonds are corporate debt units issued by companies that are securitized as tradeable assets. Bonds…

Q: If interest rates rise, prices of short-term bonds will decline less than long-term bonds. Is this…

A: If interest rates rise, prices of short-term bonds will decline less than long-term bonds because…

Q: if the market rate of interest is lower than the stated rate, bonds will sell at an amount ?

A: Solution: if the market rate of interest is lower than the stated rate, then bond will sell at an…

Q: What is the connection between the interest rate and the price of a fixed-coupon bond? Why is it…

A: Interest rate is the rate that is prevailing in the market on which you can invest your money. Fixed…

Q: Why is it important to know the interest rate risk when investing in bonds? Does interest rate risk…

A: Interest rate risk is the risk that the bond investment reduces in value which results from changes…

Q: If you buy a callable bond and interest rates decline, will the value of your bond rise by asmuch as…

A: Bond valuation refers to the evaluation of bond value at any point of time, which can be used for…

Q: nterest rate risk refers to changes in the bond's     ______________ (coupon rate, credit rating,…

A: Interest rate risk refers to the potential loss in the value of a bond or bond portfolio due to…

Q: hort-term interest rates are more volatile than long-term interest rates. Despite this, rates of…

A: Reconciliation of the following views by taking: Observation 1: Short-term interest rates are…

Q: Does it make any difference if the coupon rate on a bond is more than the needed rate of return on…

A: Introduction: Bond prices are determined by the needed rate of return on the bond, and bond prices…

Q: When the interest rate on newly issued bonds increases, the price of existing bonds: Group of…

A: Issuance of bonds is one of the form of liability for the business, on which regular interest…

Q: he following statements is TRUE? emand for a bond declines when it becomes less liquid, decreasing…

A: A liquid asset is one that can be converted to cash quickly and easily. Liquid assets include cash,…

Q: Explain the impact of a decline in interest rates on the prices of existing bonds.

A: Bonds prices are related to interest rate in market. Prices of bond depends on rate of interest in…

Q: Explain how does a bond par value differs from its market value? Are variable rate bonds attractive…

A: 1. The par value is the face value which the borrower is entitled to return to the investor at…

Q: Why is it said that zero-coupon bonds lock in the reinvestment rate?

A: The objective of the question is to understand why it is said that zero-coupon bonds lock in the…

Q: Why is there a risk of downgrading on long-term bonds?

A: Long-term bonds are usually for longer terms like 10, 20, 25 or 30 years. due to longer durations,…

Q: Why is the yield of bonds with credit risk higher than that of otherwise identical default-free…

A: The question is based on the concept of calculation of yield to maturity in bond investment , the…

Q: d. How does the credit spread change with the bond rating? Why? (Select the best choice below.) A.…

A: CONCEPT. 1. bond rating. Bond ratings represent credit worthiness of corporate bond or government…

Q: If interest rates in the economy are rising, the market value of previously issued bonds will a.…

A: If interest rates in the economy are rising, the market value of previously issued bonds will…

Q: Bonds are a common long-term debt instrument. They are interesting because they are issued with a…

A: 1. If the bond is selling at a premium is that the value of a bond is more than its face value.…