Assume that a 10-year semi-annual, 8% bond is callable after ~ 5 years at 101% of par value and the discount price in today"s industry is 6%. Making use of the price-to-worst method, what is the value of this bond? a. $1,000 b. $1,149 c. $1,093 d. $1,214 e. $1,010
Which the the following is TRUE concerning the interest price risk while investing in fixed-coupon blame obligations?a. The greater the coupon ~ above a bond, the greater the volatility of shortcut prices, the higher the interest rate riskb. Interest rate risk is the easiest risk come assess, among the four types of risks.c. The much longer the maturity the a bond, the reduced the volatility of bond prices, the smaller sized the risk.d. Interest price risk is the risk that a readjust in market interest rates will affect the attention payments come the bond holders.e. Fluctuations in industry levels of interest prices would influence the price a bond.
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You very own a 10-year bond and a 20-year bond, both the which are non-callable bond and also pay a coupon of 5%. What is true about the adjust in the worth of your bonds, if the interest rate falls from 12% come 9%?a. The worth of the 20-yr bond will decrease through $46 more than the 10-yr bondb. The worth of the 20-yr bond will certainly decrease by $27 more than the 10-yr bondc. The worth of the 20-yr shortcut will boost by $19 more than the 10-yr bondd. The worth of the 20-yr shortcut will boost by $27 more than the 10-yr bonde. The worth of the 20-yr bond will boost by $72 an ext than the 10-yr bond
Which of the complying with is TRUE regarding fixed price premium bonds?a. The bond"s coupon rate is reduced than the yield that it offers. B. The bond"s coupon price is higher than the yield that it offers. C. The bond"s coupon rate is same to the yield the it offers. D. The market value that the link is much less than its par value. E. The sector value the the bond is equal to that is par value.
Value a 20-yr semi-annual, non-callable bond the pays coupons the 8% assuming sector interest rates are 9%.a. $989 b. $1,000 c. $909 d. $1,455 e. $908
Which the the complying with is true around bonds?a. The link rating being adjusted from BBB+ come A would an outcome in a greater required yieldb. The primary benefit to municipal bonds is reduced reinvestment hazard c. Callable binding require higher yields than non-callable bonds due to the fact that of greater default riskd. Treasury securities are priced once per month while other bond price fluctuate dailye. The issuer retains interest price risk top top floating price bonds
Which the the listed below is/are thought about the risk(s) the the link issuer will certainly not pay attention or principal?a. Default threat b. Reinvestment danger c. Interest rate risk d. Prepayment threat e. Such threat doesn"t exist
According to the random Walk Hypothesis, in efficient markets, ________.a. Share prices space not random. B. Stock prices deserve to be predicted solely on the communication of previous movements. C. There is a predictable trend in share prices. D. Share prices room random and also cannot be predicted specifically on the communication of previous movements.e. Share prices room not random and they deserve to be predicted by past movements.
Which the the complying with is the danger that changes in industry rates will influence the value of a bond?a. Default threat b. Reinvestment hazard c. Prepayment risk d. Interest rate risk e. Systematic risk
Which that the adhering to is definitely true when interest rates are greater than a bond"s coupon rate?a. Shortcut will sell at a premium b. Shortcut will sell at a discount c. Link will offer at par d. Coupon price will be increased to current interest rate e. Major to be repaid will increase
Given the complying with information, calculate the present value of the following bond the pays semi-annual coupons. Par value: $1,000. Coupon Rate: 6%. Interest Rate: 8%. Maturity: 10 years.a. $1,149 b. $804 c. $864 d. $1,000 e. $919
Which that the adhering to is true that bonds?a. Bonds space an same investment. B. Bond repay the principal to the investor in semi-annual payment only. C. Bond don"t have actually default risk. D. Bond are just issued through governments and also municipalities. E. Binding pay primary at maturity.
Which of the following is true concerning the term of a bond?a. Bond with much longer durations are always preferable come bonds with shorter durations.b. The term of a par bond is equal to the existing time to maturity. C. The longer the duration, the much more sensitive a bond"s worth to interest rate fluctuations.d. Bonds with the exact same time to maturity will always have the very same duration e. Duration is a measure up of the price volatility of an asset given a adjust in the coupon rate.
A downward sloping productivity curve method that:a. Investors require lower returns for much shorter maturity Treasuries. B. Investors require higher returns for much longer maturity Treasuries. C. Investors expect interest rates to decline. D. Investors need the exact same return for both short and long-term Treasuries. E. The productivity curve is not connected to required return ~ above Treasuries.
Which the the following is a risk linked with bonds?a. Low principal Risk b. Zero coupon risk c. Ratings Upgrade danger d. Default danger e. Stock sector Risk
Which that the following is true worrying the interest price risk the bonds?a. The greater the coupon that a bond, the greater the interest rate risk of that bondb. The much shorter the maturity the a bond, the higher the interest rate risk of that bondc. The much longer the maturity of a bond, the reduced the interest price risk of that bondd. The length of maturity the a shortcut does not influence interest rate risk e. The reduced the coupon the a bond, the greater the interest price risk of the bond
If friend bought a stock because that $75 and sold it for $85 ~ a year, you additionally received a dividend the $5 in that year. What to be the RETURN you got over the year?a. -11.8% b. -15.0% c. 5.0% d. 10.0% e. 20.0%
Calculate worth of a perpetuity with even annual cash flows of $11,000 v 8% discount rate.a. $10,000 b. $137,500 c. $11,664 d. $108,000 e. $233,280
According to ______________, stock prices reaction instantaneously, totally and correctly to every publicly obtainable information.a. Pure expectations hypothesis b. The liquidity preference theory c. The market segmentation theory d. The arbitrarily walk theory e. The reliable markets hypothesis
What is true about the excess return period?a. The is the period in i m sorry a certain is maybe to earn returns on new investments that are better than its price of resources due to competitive benefit of the firm over othersb. A greater cost of funding will an outcome in a agency having a lower excess return periodc. Strong economies the scale generally mean a lower excess return duration d. The excess return duration is the timeframe historically the a agency was able to outperform the markete. The intrinsic worth of a firm will be reduced if it has a greater excess return period
Which the the following is an instance of an essential analysis?a. Examining historical stock price movements. B. Studying financial statements. C. Examining the everyday trading volume of the stock. D. Evaluating the price and volume relationships. E. Evaluating the share price momentum.
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Which that the following is true around the dividend policy of a company?a. The dividend plan of a company should impact the future value of a stock yet not the existing valueb. Carriers with short excess return periods commonly pay reduced dividends c. The higher the dividend paid, the greater the present value that the share d. If the dividend is intended to grow, the will minimize the expected future worth of the stock due to the fact that the company is not reinvesting in brand-new projectse. If interest prices increase, the dividend plan of a firm will always become an ext conservative
Which is true about callable bond when contrasted to comparable non-callable bonds?a. Callable bonds usually have greater credit ratings than similar non-callable bonds.b. Callable bonds usually have reduced yields. C. Callable bonds normally have greater yields d. Callable bonds and non-callable bonds normally have the exact same yield. E. Callable bonds are subject to much less prepayment risk.
Under which script is an issuer MOST most likely to speak to their bonds?a. Bond prices go down b. The issuer"s credit transaction rating boosts c. The issuer"s credit rating deteriorates d. Interest prices remain the same e. The firm faces a liquidity crisis
Essentials that Investments through S&P bind-in map (Irwin/McGraw-Hill series in Finance)7th EditionAlan J. Marcus, Alex Kane, Zvi Bodie