Which of the following are generally true of all bonds? Group of answer choices a) Prices and returns for long-term bonds are more volatile than those for shorter-term bonds. b)Even though a bond has a substantial initial interest rate, its return can turn out to be negative if interest rates rise. c) The longer a bond's maturity, the lower is the rate of return that occurs as a result of the increase in the interest rate. d) All of the above are true. e) Only A and B of the above are true.

Which of the following are generally true of all bonds? Group of answer choices a) Prices and returns for long-term bonds are more volatile than those for shorter-term bonds. b)Even though a bond has a substantial initial interest rate, its return can turn out to be negative if interest rates rise. c) The longer a bond's maturity, the lower is the rate of return that occurs as a result of the increase in the interest rate. d) All of the above are true. e) Only A and B of the above are true.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 2Q: Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices...

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Which one of the following statements is NOT true? As interest rates increase, bond prices increase. Interest rate risk is the risk that bond prices will change as interest rates change. Interest rate changes and bond prices are inversely related. Long-term bonds have more price volatility than short-term bonds of similar risk
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Under what situation might a bond discount arise when issuing bonds? Select one: a. The coupon rate is less than the effective or yield rate. b. The effective or yield rate is less than the coupon rate. c. The coupon rate is less than the cash rate of interest. d. The effective or yield rate is less than the market rate of interest.
Money duration is the appropriate measure of interest rate risk for bonds with embedded options. Select one: True False
According to the expectations theory of the term structure, O a when the yield curve is steeply upward-sloping, short-term interest rates are expected to rise in the future. O b. when the yield curve is downward-sloping, short-term interest rates are expected to decline in the future. O c. buyers of bonds prefer short-term to long-term bonds. O d. all of the above. O e. only A and B of the above.
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do you predict will happen the market equilibrium price of bonds if the yield to maturity on bonds is expected to decrease, all else remaining constant? a. Your graph should support your statement.
“Short-term interest rates are more volatile than long-term interest rates, soshort-term bond prices are more sensitive to interest rate changes than arelong-term bond prices.” Is this statement true or false? Explain.
3. Bond prices and yields (S3.1) Construct some simple examples to illustrate your answers to the following:
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Which of the following sentences about bonds’ optional features is true? Explain A.A borrower will be willing to pay a higher yield on a bond with a put option. B.A callable bond allows the borrower to make an early repayment of the principal. C.The yield on a puttable bond will be higher than the yield on a bond with similar characteristics but no optional features. D.An investor will be willing to pay more for a bond with a call back provision.