Please correct answer and don't use hand rating When a coupon bond sells for a price that is above its face value, the yield tomaturity:Is always equal to the coupon rate.Is always greater than the coupon rate.Is always less than the coupon rate.None of above得

1. The yield to maturity is always equal to the coupon rate.The yield to maturity (YTM) is only…

Answered: When a coupon bond sells for a price…

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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Which are TRUE about the inverse relationship between price and yield: a. when interest rates rise; bond prices fall b. interest rates have no effect on the price of a zero-coupon bond c. when yields go up; prices go down d. the yield on a 30-year bond goes up when interest rates go up
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:
Coupon payments are fixed, but the percentage return that investors receive varies based on market conditions. This percentage return is referred to as the bond’s yield. Q1. Yield to maturity (YTM) is the rate of return expected from a bond held until its maturity date. However, the YTM equals the expected rate of return under certain assumptions. Which of the following is one of those assumptions? a. The bond is callable. b. The probability of default is zero. Consider the case of RTE Inc: Q2. RTE Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $1,130.35. However, RTE Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on RTE Inc.’s bonds? Value YTM ? YTC ? Q3. If interest rates are expected to remain constant, what is the best estimate of the remaining life left for RTE Inc.’s bonds? a. 8 years b. 10…
. Bond yields Coupon payments are fixed, but the percentage return that investors receive varies based on market conditions. This percentage return is referred to as the bond’s yield. Yield to maturity (YTM) is the rate of return expected from a bond held until its maturity date. However, the YTM equals the expected rate of return under certain assumptions. Which of the following is one of those assumptions? The bond is callable. The probability of default is zero. Consider the case of Demed Inc.: Demed Inc. has 9% annual coupon bonds that are callable and have 18 years left until maturity. The bonds have a par value of $1,000, and their current market price is $1,160.35. However, Demed Inc. may call the bonds in eight years at a call price of $1,060. What are the YTM and the yield to call (YTC) on Demed Inc.’s bonds?
The coupon rate is less than the yield to maturity when the bond sells for less than par. Select one: True False
The 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 problem
The inverted yield curve predicts that bond prices will fall. Select one: True OR False
The yield to maturity on a bond with a price equal to its par value will Select one: a. Will depend upon the required return. b. Will be lower than the coupon rate. c. Always be equal to the coupon rate. d. Will be more than the coupon rate
If a bond sells for its par value, the coupon interest rate and yield to maturity are equal. True False *
For a discount bond, the current yield isthe yield to maturity, and the coupon rate is the yield to maturity. Select one: O a. less than; less than O b. equal to; equal to O c less than; greater than O d. greater than; greater than O e. greater than; less than

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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 得