A $1000 par value bond will have a current market value of $1000 when... Select one: a. bond's coupon rate = 10% default risk is zero O G. bond's coupon rate = 0 O d. investor required rate of return = bond's coupon rate O e. the bond is not taxable O f. bond's coupon rate> investor required rate of return O b
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- Calculating the risk premium on bonds The text presents a formula where (1+1) = (1-p)(1 +i+x) + p(0) where i is the nominal interest rate on a riskless bond x is the risk premium p is the probability of default (bankruptcy) If the probability of bankruptcy is zero, the rate of interest on the risky bond is When the nominal interest rate for a risky borrower is 8% and the nominal policy rate of interest is 3%, the probability of bankruptcy is %. (Round your response to two decimal places.) When the probability of bankruptcy is 6% and the nominal policy rate of interest is 4%, the nominal interest rate for a risky borrower is %. (Round your response to two decimal places.) When the probability of bankruptcy is 11% and the nominal policy rate of interest is 4%, the nominal interest rate for a risky borrower is %. (Round your response to two decimal places.) The formula assumes that payment upon default is zero. In fact, it is often positive. How would you change the formula in this case?…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 premiumA fixed rate bond with notional 1 pays annual coupons of c at times T1,T2,...,Tn whereTi+1 =Ti+1andnotional1attimeTn. a) Write down the bond price Bc^(FXD)(t) at time t ≤ T in terms of ZCBs.
- the par value. When the is higher than the coupon rate, the bond sells at a O a. time to maturity; premium over O b. time to maturity; discount to Oc yield to maturity; premium over O d. yield to maturity; discount to CONTACT US 2 Type here to search WBond A has a coupon rate of 4% and a yield of 4%. Bond B has a coupon rate of 3% and a yield of 3%. Which bond has the higher price? (All else equal.) Select one: a. Bonds A & B will have the same price b. not enough information to determine c. B d. AK Bonds are priced in the market so that their A. stated rate B. yield OC. discount OD. par value is the same as the market rate of interest.
- Explain what you see from the pricing calculations. How do the two bonds differ? Bond C Bond Price = PV(rate,nper,pmt,fv) Given: n = Period which takes values from 0 to the nth period = 0,1,2,3 & 4 Cn = Coupon payment in the nth period = 10%*$1,000 = $100 YTM = interest rate or required yield = 9.6% P = Par Value of the bond = $1,000 Bond Z Bond Price = PV(rate,nper,pmt,fv) Given: n = Period which takes values from 0 to the nth period = 0,1,2,3 & 4 Cn = Coupon payment in the nth period = 0%*$1,000 = $0.00 YTM = interest rate or required yield = 9.6% P = Par Value of the bond = $1,000 years Bond A Bond Z 4 $1,012.79 $693.04 3 $1,010.02 $759.57 2 $1,006.98 $832.49 1 $1,003.65 $912.41 0 $1,000.00 $1,000.00On the maturity date of a bond, the bond owner receives: Group of answer choices O. the face value only O. a coupon payment only O. a coupon payment plus the face value O. a coupon payment plus the purchase price O. the purchase price only Don't use chatgptAll else the same, if interest rates fall, then 1. bond prices will rise II. coupon payments on floating rate bonds will fall III. the percentage price change for short-term bonds will be greater than for long-term bonds IV. the percentage price change for high coupon bonds will be greater than for low coupon bonds Select one: Oa. I, III, and IV only Ob.land Il only Oc. Il and IV only
- TB TF Qu. 3-30 The yield to maturity on a bond is really... The yield to maturity on a bond is really its internal rate of return. True or False True False5. Bond Relationships. Select one or more of the following phrases to complete the followingsentences. increase , decrease, par, discount, premium, less than, more than, greater , less, fall,rise a. If the current interest rate exceeds the bond’s coupon rate, the bond will sell at a___________.b. The value of a bond to increase if there is a/an ________ in interest rates.c. A bond’s coupon rate is more than the interest rate, therefore the bond is selling at a_____________.d. As interest rate increases the value of a bond will ______________.e. If the bondholder’s required rate of return equals the coupon interest rate, the bondwill sell at _________.f. A premium bond sells for ____________ as maturity approaches.g. The discount bond sells for ____________ as maturity approaches.h. A bondholder with a short-term bond is exposed to ___________ interest rate risk thanwhen owing a long-term bond.i. When interest rates __________, the market required rates of return ________, and thebond…1.If the coupon rate is less than the market rate, the bond will be a: Group of answer choices A. premium bond B. discount bond C. at par bond 2.If the coupon rate is greater than the market rate, the bond will be a: A. premium bond B. discount bond C. at par bond 3. If the price of the bond is greater than the par value, then the bond is a: A. premium bond B. discount bond C. at par bond 4.Company X is issuing bonds. They plan to issue 10,000, $1000 par, 7% bonds that pay semi-annual for 5 years. If the price per bond is $1020, what is the market annual rate-of-return? (percentage, 2 decimals, e.g. xx.xx)