Which statements is INCORRECT? Treasury bonds (T-bond) have maturities up to 30 years A coupon bond is called a discount bond when its market price is less than its fair price A bond's yield to maturity (YTM) is the return an investor earns if holding the bond until its maturity Treasury bills (T-bill) have maturities up to one year

Which statements is INCORRECT? Treasury bonds (T-bond) have maturities up to 30 years A coupon bond is called a discount bond when its market price is less than its fair price A bond's yield to maturity (YTM) is the return an investor earns if holding the bond until its maturity Treasury bills (T-bill) have maturities up to one year

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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The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%) 1 4.6% 5.6 6.6 2 3 Next year at this time, you expect it to be: Maturity (Years) 2 YTM (%) 5.6% 6.6 7.6 Required: a. What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? b. Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? c. Is the market's expectation of the return on the 3-year bond greater or less than yours? Complete this question by entering your answers in the tabs below. Required A Required B Required C Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? Note: Round your answers to 2 decimal places. Maturity 1 2 YTM % %
Bond J is a 4 percent coupon bond. Bond K is a 12 percent coupon bond. Both bonds have nine years to maturity, make semiannual payments, and have a YTM of 8 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate risk of lower-coupon bonds?
Please see attached. Definitions: Zero-coupon bond is a bond that pays no coupons over its maturity. Yield to maturity (YTM) is the return the bond holder receives on the bond if held to maturity. Par value is the principal amount to be repaid at the maturity of the bond. Maturity date is the expiration date of the bond on which the final interest payment is made as well as the principal repayment.
Consider the following two Treasury securities: Bond Price Modified duration (years) A $100 6 B $80 7 For a 25 basis-point change in interest rates, which bond has the greatest percentage change in price? A. Bond A B. Bond B C. Can't be determined
Suppose that you have invested in a Treasury bond with a term-to-maturity of 8 years. What will happen to the duration of your bond if interest rates increase by 2 percentage points? Group of answer choices The duration will increase The duration will decrease The duration won't change Not enough information
The term structure for zero-coupon bonds is currently: Maturity (Years) YTM (%) 1 5.2% 2 6.2 3 7.2 Next year at this time, you expect it to be: Maturity (Years) YTM (%) 1 6.2% 2 7.2 3 8.2 Required: What do you expect the rate of return to be over the coming year on a 3-year zero-coupon bond? Under the expectations theory, what yields to maturity does the market expect to observe on 1- and 2-year zeros at the end of the year? Is the market's expectation of the return on the 3-year bond greater or less than yours?
A $1,000 bond with a coupon rate of 5.7% paid semiannually has five years to maturity and a yield to maturity of 7%. If interest rates rise and the yield to maturity increases to 7.3%, what will happen to the price of the bond? A. fall by $14.37 B. rise by $11.97 C. fall by $11.97 D. The price of the bond will not change.
don't provide handwritten solution.
There are three bonds that mature at the same time, have the same par value, and are expected to pay their first annual coupon 1 next year. The bonds are detailed in the below table. Bond A B с PV PV PV Present Value B ? ? ? PV B If ca r, then what can we say about the prices of the bonds today? (Enter >, <, or ?) PV C PV Yield to Maturity C r rb Coupon Rate ca с с
A 10-year bond with a face value of $1,000 currently sells for $1,110. Which of the following statements is correct? Select one: a. The bond's current yield is equal to its coupon rate. b. The bond's coupon rate exceeds its current yield to maturity. c. None of the given answers is correct. d. The bond's yield to maturity is greater than its coupon rate.
A 10-year bond with a face value of $1,000 currently sells for $1,110. Which of the following statements is correct? Select one: a. The bond's yield to maturity is greater than its coupon rate. b. The bond's coupon rate exceeds its current yield to maturity. c. The bond's current yield is equal to its coupon rate. d. None of the given answers is correct.
K Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): Period 0 2 Cash Flows $19.12 $19.12 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) 39 $19.12

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