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.

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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A bond's real rate of return is reflected by the bond's 1). YTM 2). Coupon Rate 3). Par Value 4). Selling Price 5). Redemption Value
True or False? Macaulay duration of measure of the curvature in the relationship between bond prices and bond yields.
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…
1. If a company's bonds are selling at a discount, then Select one: a. The coupon interest rate is equal to the going interest rate b. The going rate of interest is above the coupon rate c. The current interest rates are below the coupon rate d. The YTM is below the coupon interest rate
A "discount" bond's price is less than it's par value because the coupon rate is less than the yield to maturity. A) True B) False
Assuming that the market and coupon rates remain constant till maturity; a.the bond's price will remain constant over time b.No option is correct c.the bond price will approach its market value over time d.the bond's price will approach its face value over time
As interest rates, and consequently investors' required rates of return, change over time, the ________ of outstanding bonds will also change. a. price b. par value c. coupon interest payment d. maturity date
What is the impact of bond price fluctuations on the yield or APR of a bond? When bond prices go down, the yield or APR goes up. When bond prices 90 up, the yield or APR also goes up Bond price fluctuations have noimpact on the yield or APR
a) All things being equal If a bond's coupon rate is higher than its yieldto maturity (YTM), is the bond selling at a discount, premium or par?b) All things being equal If a bond's coupon rate is lower than its yield tomaturity (YTM), is the bond selling at a discount, premium or par?c) All things being equal If a bond's coupon rate is equal to its yield tomaturity (YTM), then is the bond selling at a discount, premium or par?d) All else being equal, the longer the term to maturity, the greater orthe lower the duration?f) All else being equal, the higher the coupon rate on the bond, theshorter or the longer the duration of the bond?
A bond’s coupon rate is more than the interest rate, therefore the bond is selling at a _____________.
Which of the follwing statement is correct. As the credit risk of a bond increases: The YTM falls and price of the bond falls The YTM increases and price of the bond falls The YTM falls and price of the bond rises The YTM increases and price of the bond rises unanswered
Which of the following statements is correct assuming same market rates for all maturities (flat yield curve)? e a Extendible bonds allow bond issuer to extend the maturity date. O b. Callable bonds give the bond issuer an option to call the bond back before the maturity date at a predetermined price. Oc. When the market yield is equal to a bond's stated coupon rate, the bond's current yield is greater than its coupon yield. Od. The cash price plus the accrued interest on the bond is the quoted price of the bond. Current yield is the ratio of annual coupon payment divided by the par value. o e.

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