Question

1. Which of the following bonds has the highest interest rate risk (all else equal)? a....

1. Which of the following bonds has the highest interest rate risk (all else equal)? a. 2.5%, 5-years to maturity b. 0% Coupon, 30-years to maturity c. 0%, 5-years to maturity d. 2.5% Coupon, 30-years to maturity?

2.

A 10-year Treasury Note is an example of:

a.

An interest only loan
b.

A pure discount loan
c.

An amortized loan
d.

None of the above
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer is B

0% Coupon, 30-years to maturity

Because zero coupon bonds are more sensitive to interest rate change as their duration equal to their maturity period and as there is no coupon payment so any change in market interest rate will affect the value of zero coupon bond.

Answer Is A

An interest only loan

0-year US Treasury Note is a debt obligation that is issued by the Treasury Department of the United States Government. it pays interest to the holder every six months at a fixed interest rate

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
which of the following bonds has the highest price risk or interest rate risk? 1. a...
which of the following bonds has the highest price risk or interest rate risk? 1. a 10 year old 0% coupon bond 2. a 5 year old 0% coupon bond 3. a 10 year 5% coupon bond 4. a 5 year 5% coupon bond
Which of the following bonds has the highest interest rate risk? All bonds have the same...
Which of the following bonds has the highest interest rate risk? All bonds have the same face value and make annual coupon payments. A. 10-year bonds with 5% coupon rate B. 10-year bonds with 4% coupon rate C. 10-year bonds with 3% coupon rate D. 5-year bonds with 6% coupon rate E. 5-year bonds with 5% coupon rate The Grand Adventure has a 7-year, 6 percent annual coupon bond outstanding with a $1,000 par value. The bond has a yield...
Consider the following bonds: Bond Issuer Time to maturity Coupon rate Coupon frequency 1 US Treasury...
Consider the following bonds: Bond Issuer Time to maturity Coupon rate Coupon frequency 1 US Treasury 3 years 8% Semi-annual 2 US Treasury 5 years 3% Annual 3 US Treasury 5 years Zero N/A 4 US Treasury 5 years 3% Semi-annual All else being equal, rank the bonds (1,2,3,4) from highest to lowest sensitivity to interest rate changes.
show all works 1. The real risk-free rate of interest is 1%. Inflation is expected to...
show all works 1. The real risk-free rate of interest is 1%. Inflation is expected to be 4% the next 2 years and 7% during the next 3 years after that. Assume that the maturity risk premium is zero. What is the yield on 3-year Treasury securities? (5 points) 2. The real risk-free rate of interest is 2.5%. Inflation is expected to be 2% the next 2 years and 4% during the next 3 years after that. Assume that the...
1. A Treasury bond has a 10% annual coupon and a 10.5% yield to maturity. Which...
1. A Treasury bond has a 10% annual coupon and a 10.5% yield to maturity. Which of the following statements is CORRECT? * a. The bond sells at a price below par. b. The bond has a current yield less than 10%. c. The bond sells at a discount. d. a & c. e. None of the above 2. J&J Company's bonds mature in 10 years, have a par value of $1,000, and make an annual coupon interest payment of...
Which of the following statements is most correct? a.         All else equal, if a bond’s yield to...
Which of the following statements is most correct? a.         All else equal, if a bond’s yield to maturity increases, its price will fall. b.         All else equal, if a bond is down graded by the rating agencies its yield to maturity will increase. c.         If a firm has two bond issues that are identical except one is subordinate to the other, the subordinate issue will have a higher yield to maturity than the other issue. d.         A B and C are correct. e.         None of...
5. Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. Also,...
5. Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 6.75%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10-year bonds is 1.15%. What is the default risk premium on corporate bonds? A. 1.08% B. 1.20% C. 1.32% D. 1.45% E. None of the above. 6. A company has two $1,000 face value bonds outstanding bond selling for $701.22....
1. Which one of the following bonds has the greatest interest rate risk? a. 10-y &...
1. Which one of the following bonds has the greatest interest rate risk? a. 10-y & 2% coupon b. 20-y & 3% coupon c. 20-y & 4% coupon d. 20-y & 2% coupon 2. There are two methods used to amortize a loan: fixed principal payment vs. fixed total payment. Under the fixed principal payment approach, what is the observation on the periodic interest payment? a. The interest payment is increasing over time. b. The interest payment is decreasing over...
Please rank the following three bonds based on their interest rate risk: from highest to lowest....
Please rank the following three bonds based on their interest rate risk: from highest to lowest. Assume all other characteristics of the three bonds are equivalent. I: 30-year 1% coupon II: 1-year 2% coupon III: 30-year 2% coupon Choose one of the following: II>I>III I>II>III III>II>I III>I>II II>III>I I > III > II
All else equal, which of the following types of “special feature” bonds would likely carry a...
All else equal, which of the following types of “special feature” bonds would likely carry a lower coupon rate than would the same bonds if issued without the “special feature”? A. Callable B. Convertible C. Redeemable (put option) D. Both B and C E. A, B, and C
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT