When the price of a bond is above the face value, the bond is said to be* Trading at par Trading at a premium Trading at a discount Trading below par
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When the price of a bond is above the face value, the bond is said to be*
- Trading at par
- Trading at a premium
- Trading at a discount
- Trading below par
Step by step
Solved in 2 steps
- 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 thanA 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 ValueA bond’s expected return is sometimes estimated by its yield to maturity (YTM) and sometimes by its yield to call (YTC). The YTC is a better estimate when the bond sells at... a. a discount. b. a premium. c. par value.
- A bond will sell at ____________ if the required return is greater than the coupon rate. Select one: a. A discount b. Liquidation value c. Par d. A premiumExplain briefly whether a zero-coupon bond will be selling (i) at a premium, and (ii) at par.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?
- Please helpThe 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.Describe the relationship between coupon rate and required rate of return that will result in a bond selling at a discount, par value and a premium.
- Which one of the following statements is true regarding bond valuation?a. When yield to maturity is higher than coupon rate, the bond is called a premium bondb. When yield to maturity is higher than coupon rate, the bond is traded at parc. When yield to maturity is less than coupon rate, the bond is called a discount bondd. When yield to maturity is higher than coupon rate, the bond is called a discount bonde. When yield to maturity is equal to coupon rate, the bond is called a premium bondEvaluate the following statement:The Yield-to-Maturity (YTM) of a par bond is higher than that of a discount bond.A bond has a market price that exceeds its face value. Which one of these features currently applies tothis bond?Select one:a. Yield to maturity less than the coupon rate.b. Currently selling at par.c. Current yield greater than coupon rate.d. Yield to maturity equal to the current yield.e. Discount bond.