When a firm gets riskier what will happen to its bonds Multiple Choice the market interest rate of the bonds will go up and the price of the bonds will go up the market interest rate of the bonds will go down and the price of the bonds will go up the market interest rate of the bonds will go down and the price of the bonds will go down the market interest rate of the bonds will go up and the price of the bonds will go down there is no definite answer

When a firm gets riskier what will happen to its bonds Multiple Choice the market interest rate of the bonds will go up and the price of the bonds will go up the market interest rate of the bonds will go down and the price of the bonds will go up the market interest rate of the bonds will go down and the price of the bonds will go down the market interest rate of the bonds will go up and the price of the bonds will go down there is no definite answer

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

We know that a vanilla bond with a coupon rate below the market rate of interest will sell for a discount and that a vanilla bond with a coupon rate above the market rate of interest will sell for a premium. What kind of bond or loan will sell at its par valueregardless of what happens to the market rate of interest?
Assume that the risk-free rate increases, but the market risk premium remains constant. What impact would this have on the cost of debt? What impact would it have on the cost of equity? Start a New Thread
Now suppose there is no financial intermediary to handle liquidity shocks. However, at t = 1 a market for bonds opens up and agents can trade their wealth at t = 1 for wealth at t = 2. Each bond pays 1 at t = 2 and its price is pM. Calculate the consumer's optimal investment decision IM at t = 0, the price of the bond pM, and the optimal consumption in the two states cM, cM. Compare the mutual fund and bond market allocations: are c4 and c bigger or smaller than cf and c, respectively?
The time value of money is used in calculating bond prices because: Group of answer choices A - The company might choose to repay the bonds prior to their maturity date B - Bond investors receive future payments and purchase bonds with current dollars C - The amount to be repaid at maturity will change as market rates change D - Cash interest payments to bondholders will change as market rates change
How can a company offset risk using interest rate swaps?
Bond traders, currently in possession of the bonds, are hoping for the Group of answer choices yield to remain steady. coupon rate to rise. yield to rise. yield to fall. coupon rate to fall.
Why do at least some investors like to invest in asset-backed securities? Check all that apply: ABS are less risky than bonds with the same rating. It lowers their capital requirements. It gives them control over more assets. ABS often pay higher interest rates than bonds with the same rating.