When a coupon bond sells for a price that is above its face value, the yield to maturity: Is always equal to the coupon rate. Is always greater than the coupon rate. Is always less than the coupon rate. None of above 易
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- Suppose that x is the continuously compounded yield to maturity on a zero-coupon bond that pays off $1 at time T. Assume that x follows the process: dx = a (x₁ - x) dt + sx dz where a, x0, and s are positive constants and dz is a Wiener process. What is the process followed by the bond price? Solutions:The coupon rate is less than the yield to maturity when the bond sells for less than par. Select one: True FalseThe coupon rate is greater than the yield to maturity when a bond sells at a premium. Select one: True False
- 4. 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.Please solve this practice problemThe inverted yield curve predicts that bond prices will fall. Select one: True OR False
- Please correct answer and don't use hand ratingWhat is a bond’s market value when the required rate of return (ie market rate) is less than the coupon rate? The bond’s market value is less than the par value. The bond’s market value is the same as the par value. The bond’s market value is greater than the par value. None of the above.As the price of a bond □ a. rises; rises Ob. falls; falls c. rises; falls O d. falls; rises and the expected return , bonds become more attractive to investors and the quantity demanded rises.
- 2You predict that interest rates are about to fall. Which bond will give you the highest capital gain?a. Low coupon, long maturity.b. High coupon, short maturity.c. High coupon, long maturity.d. Zero coupon, long maturity.Which of the following is NOT true regarding bonds? O If a bond is selling at a discount, then the current yield is greater than the yield-to-maturity. An increase in market interest rates leads to a decrease in bond prices. O If the coupon rate on a bond is lower than the yield-to-maturity, the bond sells at a discount. O If the coupon rate on a bond equals the yield-to-maturity, then the bond sells at par.