The following statements describe the general characteristics of price of the coupon bond. Which one is false? a. When the market interest rate falls, the bond price rises. b. The value of bond can be computed as the sum of PDV (present discount value) of all the remaining future payments associated with it. c. When the market interest rate is the same as the coupon rate, the value of bond equals the face value. d. The face value and the coupon rate are fixed for the life of the bond. None of the above are false. е.

The following statements describe the general characteristics of price of the coupon bond. Which one is false? a. When the market interest rate falls, the bond price rises. b. The value of bond can be computed as the sum of PDV (present discount value) of all the remaining future payments associated with it. c. When the market interest rate is the same as the coupon rate, the value of bond equals the face value. d. The face value and the coupon rate are fixed for the life of the bond. None of the above are false. е.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 3Q: The rate of return on a bond held to its maturity date is called the bonds yield to maturity. If...

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Which of the following statements is false? A. Other things being equal, an increase in a bond’s maturity will increase its interest rate risk. B. Other things being equal, an increase in the coupon rate of a bond will decrease its interest rate risk. C. Other things being equal, an increase in a bond’s YTM will decrease its interest rate risk. D. Effective duration is calculated as Macaulay duration divided by one plus the bond’s yield to maturity.
Which of the following is TRUE concerning the distinction between interest rates and returns? Select one: a. The rate of return will be greater than the interest rate when the price of the bond falls during the holding period. b. The return can be expressed as the difference between the current yield and the rate of capital gains. c. The rate of return on a bond will not necessarily equal the interest rate on that bond. d. The return can be expressed as the sum of the discount yield and the rate of capital gains
Which of the following statements is/are most CORRECT? O 11 A yield curve depicts the relationship between bond's 'time to maturity and its yield to maturity. 2) A premium bond's price will decline over time if the required return remains unchanged. 3) A discount bond's price will decline over time if the required return remains unchanged. 4) Both a and b are correct.
1. Which of the following is correct? Group of answer choices 1. The lower the price you pay for a bond, the greater is your return. 2. A bond is overpriced when its value is greater than its price. 3. A fairly priced bond has a price equal to its face. 4. The value of a bond can be determined by the present value of all coupon payments and the present value of principal payment at maturity date.
1. When the market interest rate rises, what happens to bond prices? Group of answer choices They rise They stay the same Cannot be determined They fall 2. A bond discount occurs when: Group of answer choices The price of a bond is above its face value. The price of a bond is above its maturity value. The price of a bond is below its face value. The price of the bond is equal to a bond's face value. 3. When a bond sells for a premium, Group of answer choices The price is above the face value The price is equal to the face value. The price is below the face value The price is below the maturity value. 4. A bond has a face value of $100,000 and a price of $97,000. The journal entry at the date of issuance would include: Group of answer choices A credit to Bond Discount of 3,000 A debit to Bond Discount of 97,000 A debit to Bond Discount of 3,000 A credit to Bond Premium of 3,000 5. A bond has a face…
2. Bond prices and yields (S3.1) The following statements are true. Explain why. a. If a bond's coupon rate is higher than its yield to maturity, then the bond will sell for more than face value. b. If a bond's coupon rate is lower than its yield to maturity, then the bond's price will increase over its remaining maturity.
Give typing answer with explanation and conclusion
It is the interest rate that the buyer will actually earn if the bond is held to maturity and there is no default. A. yield to maturity B. no choice given c. current yield d. coupon discount rate e. coupon payment rate
2. For cach of the following situation, identify whether a bond would be considered a premium bond, a discounted bond, or a par bond. a. A bond's current market price is greater than its face value. b. A bond's coupon rate is equal to its yield to maturity. c. A bond's coupon rate is less than its required rate of return. d. A bond's coupon rate is less than its yield to maturity. e. A bond's coupon rate is greater than its yield to maturity. f. A bond's fair present value is less than its face value. Answer: a. ..... b. с. d. e. f.
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.
Which one of the following statements is NOT true? As interest rates increase, bond prices increase. Interest rate risk is the risk that bond prices will change as interest rates change. Interest rate changes and bond prices are inversely related. Long-term bonds have more price volatility than short-term bonds of similar risk
B. TRUE OR FALSE. Use the separate answer sheet. 1. If the effective (market) interest rate is less than the coupon (stated) interest rate on the date that bonds are sold, the bond price will be less than the face value of the bonds. 2. The effective interest rate method of amortizing bond discount or premium can only be used when it doesn't materially differ from the straight-line method, as the straight-line method is considered GAAP. 3. 4. 5. 6. 7. 678 8. 9. 10. A stock dividend converts earned capital into contributed capital, but total stockholder equity doesn't change. A bond's carrying value at maturity should equal its par or face value. Most corporations set a par value for their common shares at a fairly large number, such as $100 per share, in order to minimize legal liability on the part of shareholders. Treasury shares are considered to be issued and outstanding. Paid-in capital in excess of par value will be created when a 50% stock dividend is declared. All corporate…