Question

*True/ False*Explain: A bond with a $100 annual interest payment with five years to maturity (not expected to default) would sell for a premium if interest rates were below 9 percent and would sell for a discount if interest rates were greater than 11 percent.

Answer #1

**Whenever a Bond whose coupon rate is equal to the YTM
always trades at par value.**

**Whenever a Bond whose coupon rate is greater than YTM
always trades at premium.**

**Whenever a Bond whose coupon rate is lower than YTM
always trades at discount.**

**In the present case, coupon rate is 10% ($ 100 / $
1,000) will be greater than 9% and the bond shall trade at a
premium and if the interest rate of 11% will be greater than the
coupon rate of 10%, hence the bond will trade at
discount.**

**So, the given statement is a true
statement.**

**Do ask in case of any doubts.**

A bond with a $100 annual interest payment with five years to
maturity (not expected to default) would sell for a premium if
interest rates were below 9% and would sell for a discount if
interest rates were greater than 11%.

A bond has a $1,000 par value, makes annual coupon rate of 10%,
has 5 years to maturity, cannot be called, and is not expected to
default. The bond should sell at a premium if market interest rates
are below 10% and at a discount if interest rates are greater than
10%.
T/F

The face value of the bond is paid at the maturity of the
bond.
True
False
Which of the following is used as a discount rate while
calculating the bond price?
Yield to Maturity (YTM)
Coupon Rate
Face Value
None
Coupon payments are determined by multiplying face value of the
bond with the coupon rate.
True
False
Which of the following explains the differences in interest
rates?
The length of the investment (maturity premium).
The level of risk of the...

Based upon historic information there is no relationship
between bonds ratings and the frequency of default.
True
False
Flag this Question
A bond has a $1,000 par value, the annual coupon
interest rate equals 10% (the bond makes annual interest payments
of $100), has 5 years to maturity, cannot be called, is not a
convertible bond and is not expected to default. The bond should
sell at a premium if the yield to maturity is below 10% and at a...

1. The face value of the bond is paid at the maturity of the
bond. True or false?
2. Which of the following is used as a discount rate while
calculating the bond price?
Yield to Maturity (YTM)
Coupon Rate
Face Value
None
3. Coupon payments are determined by multiplying face value of
the bond with the coupon rate. True or false?
4. Which of the following explains the differences in interest
rates?
The length of the investment (maturity premium)....

a
20 year, 8% coupon rate, $1,000 par bond that pays interest
semi-annually bought five years ago for $850. this bond is
currently sold for 950. what is the yield on this bond?
a.12.23%
b.11.75%
c.12.13%
d.11.23%
an increase in interest rates will lead to an increase in the
value of outstanding bonds.
a. true
b. false
a bond will sell ____ when coupon rate is less than yield to
maturity, ______ when coupon rate exceeds yield to maturity, and...

A bond of Visador Corporation pays $80 in annual interest,
with a $1,000 par value. The bonds mature in 18 years. The
market's required yield to maturity on a comparable-risk bond is
8.5 percent.
a. Calculate the value of the bond.
b. How does the value change if the market's required yield to
maturity on a comparable-risk bond (i) increases to 11percent or
(ii) decreases to 5 percent?
c. Interpret your finding in parts a and b.
a. What is...

Nominal interest rate represents the growth factor of purchasing
power.
True
False
As the maturity of the loan increases, the interest rate quoted
on that loan increases because of the increase in maturity
premium.
True
False
Which of the following is correct for the company's bond price
when the default risk of that company increases (when the future
prospect of the company becomes poor)?
YTM increases therefore the price of the bond increases
YTM decreases therefore the price of the...

Which of the following is (are) true?
A) If the yield to maturity is greater than the coupon rate, the
bond will sell at a premium.
B) If the yield to maturity is less than the coupon rate, the bond
will sell at a premium.
C) Market prices and interest rates are positively
correlated.
D) all of the above

A $1,000 par value bond with 5 years left to maturity pays an
interest payment semiannually with a 8 percent coupon rate and is
priced to have a 5.5 percent yield to maturity. If interest rates
surprisingly change by 0.27 percent, by how much would the bond’s
price change?

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