Question

**Based upon historic information there is no relationship
between bonds ratings and the frequency of default.**

True

False

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**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
discount if the yield to maturity is greater than 10%.**

Group of answer choices

True

False

Answer #1

1. The given statement is FALSE because historic informations are providing with the fact that when the credit ratings will be higher, it will mean that the bonds are less likely to default, and when the credit rating will be lower, the bonds are defaulting more.

2. The given statement is TRUE because when the yield to maturity is lower than coupon rate the bond will be selling at a premium.

When the yield to maturity is higher than the coupon rate, the bond will be selling at a discount.

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

A bond is a contract between the bond issuer and the bond
holder.
1. True or False: For a conventional or "vanilla" bond, the
bond's face value is set permanently by the contract until the
maturity of the bond. The bond's face value cannot change.
2. True or False: For a conventional or "vanilla" bond, the
bond's yield is set permanently by the contract until the maturity
of the bond. The bond's yield cannot change.
3. True or False: For...

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....

Bond 1
Coupon rate
6%
Annual coupon frequency
2
Par
$1,000
Time to maturity (years)
10
2. (10 points) Compute the following yields:
a) the yield to maturity for
Bond 1, above, if the current bond price is
$875.
b) the yield to call for Bond 1 if its
current price is $1050 and it is callable in 4 years at a value of
par plus one year’s coupon interest.

•Company Z has issued bonds with a par value of $1000, 20 years
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payments. The yield to maturity (YTM) is 6% per annum.
•What is the current price of the bond?
•What is the effective annual yield on this bond?
•Is this a discount or a premium bond? Discuss.
•If the market interest rate increases, what happens to this
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•If this bond would sell at...

1. If 9-year T-bonds have a yield of 2.9%, 9-year A-rated
corporate bonds yield 4.8%, the maturity risk premium on all 9-year
bonds is 1.2%, and A-rated corporate bonds have a 0.6% liquidity
premium versus a zero liquidity premium for T-bonds, what is the
default risk premium on the corporate bond?
2. You project that you will need $50,000 in 9 years to put a
down payment on a home on a conventional mortgage program. You plan
to save for...

4. The following is the YTM of five 30 year, 8% coupon, 1000 par
value bonds:
BOND / TYPE
S&P Ratings
Yield to Maturity
1 / US Govt
AAA
8.00
2 / Corporate
AAA
Not Available
3 / Corporate
B
9.00
4 / Corporate
CC
Not Available
5 / Corporate
D
10.00
a. Your boss asks you which to give him a range of possible
YTM's for the No 2 and the No 4 bond. What would be your best...

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...

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...

Z Corporation has a bond outstanding. It has a coupon rate of
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maturity but could be called after 4 years for $1000 plus a call
premium of $40. The bond is selling for $1016. The yield to call on
this bond is?
D Coporation has a bond outstanding with a coupon rate of 9% and
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