Which of the following observations is the most accurate? 48. a. A 1-year bond would have a higher (that is, better) bond ranking than a 20-year bond if all other factors are similar. b. The price danger (interest rate risk) of a 20-year bond with semiannual interest payments is greater than that of a 5-year bond with semiannual interest payments. c. Reinvestment rate danger is greater for 10-year zero coupon bonds than for 10-year 10% coupon bonds. d. You would hope to gain the yield to maturity if a callable bond was trading at a premium. e. Both a and b are right statements.
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Which of the following observations is the most accurate? 48.
a. A 1-year bond would have a higher (that is, better) bond ranking than a 20-year bond if all other factors are similar.
b. The price danger (interest rate risk) of a 20-year bond with semiannual interest payments is greater than that of a 5-year bond with semiannual interest payments.
c. Reinvestment rate danger is greater for 10-year zero coupon bonds than for 10-year 10% coupon bonds.
d. You would hope to gain the yield to maturity if a callable bond was trading at a premium.
e. Both a and b are right statements.
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