Question

A 30-year Treasury bond is issued with a face value of $1,000 and makes coupon payments of $20 every six months. If relevant market yields decrease shortly after the Treasury bond is issued, what happens to the bond’s coupon rate, current yield, and yield to maturity?

all three increase |

all three decrease. |

the coupon rate increases, the current yield increases, and the yield to maturity decreases. |

the coupon rate stays the same, the current yield decreases, and the yield to maturity decreases. |

the coupon rate stays the same, the current yield increases, and the yield to maturity increases. |

Answer #1

If the Market yield decrease shortly after the Treasury bond is issued then automatically it lowers or decreases the yield to maturity or the expected returns of the bondholders. Yield to Maturity is inversely proportional to the price of the bond hence Price of the bond rises since it has to compensate its debt holders for the lowering of the return it offers. So the current yield (Annual Interest / Price of the bond) will be lowered too. Since the bond is already issued hence coupon rates cannot be lowered further and hence it remains the same all through.

So the correct option is the option (d) which states that “the coupon rate stays the same, the current yield decreases, and the yield to maturity decreases.”

1. A 15-year bond is issued with a face value of $10,000, paying
interest of $750 a year. If yields to maturity in the market
increase shortly after the bond is issued, what happens to the
bond’s:
a. Coupon rate?
b. Price?
c. Yield to maturity?
2. A 10-year bond with a face value of $1,000 pays a coupon of
6% per year (3% of face value every six months). The reported yield
to maturity is 5.5% per year (a...

A 10-year bond is issued with a face value ofK1,000, paying
interest of K60 a year. If
market yields increase shortly after
the T-bond is issued, what happens to the bond’s
a. Coupon rate?
b. Price?
c. Yield to maturity?
A 10-year bond is issued with a face value ofK1,000, paying
interest of K60 a year. If
market yields increase shortly after
the T-bond is issued, what happens to the bond’s
a. Coupon rate?
b. Price?
c. Yield to maturity?

A 25-year maturity bond with face value of $1,000 makes annual
coupon payments and has a coupon rate of 8.1%. (Do not
round intermediate calculations. Enter your answers as a percent
rounded to 3 decimal places.)
a. What is the bond’s yield to maturity if the
bond is selling for $910?
b. What is the bond’s yield to maturity if the
bond is selling for $1,000?
c. What is the bond’s yield to maturity if the
bond is selling for...

A 20-year maturity bond with face value of $1,000 makes annual
coupon payments and has a coupon rate of 8.8%. (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 3 decimal places.)
a. What is the bond’s yield to maturity if the bond is selling
for $980?
b. What is the bond’s yield to maturity if the bond is selling
for $1,000?
c. What is the bond’s yield to maturity if the bond is selling
for...

A 15-year bond with a face value of $1,000 currently sells for
$850. Which of the following statements is CORRECT?
The bond’s coupon rate exceeds its current yield.
The bond’s current yield exceeds its yield to maturity.
The bond’s yield to maturity is greater than its coupon
rate.
The bond’s current yield is equal to its coupon rate.
If the yield to maturity stays constant until the bond matures,
the bond’s price will remain at $850.

A firm has a bond issue with face value of $1,000, a 7% coupon
rate, and nine years to maturity. The bond makes coupon payments
every six months and is currently priced at $1,067.89. What is the
yield to maturity on this bond

A 30-year maturity bond with face value of $1,000 makes
semiannual coupon payments and has a coupon rate of 9.2%.
(Do not round intermediate calculations. Enter your answers
as a percent rounded to 3 decimal places.)
a.
What is the yield to maturity if the bond is selling for
$960?
Yield to maturity
%
b.
What is the yield to maturity if the bond is selling for
$1,000?
Yield to maturity
%
c.
What is the yield to maturity if...

DK ent has issued a Ghs 1000 face value bond that
makes coupon payments of Ghs 40 semi-annually. the bond has a
30-year maturity and is selling for Ghs 1276.76.calculate the
current yield

1. A bond issued by ABC Corp. has a face value of
$1,000, coupon rate of 6%, price of $1,029.13 and time to maturity
of one year. (PLEASE SHOW ALL WORK)
a. What is its current yield?
b. What is its yield to maturity?
c. Is this a discount, premium or par bond?
Why?
d. Now suppose instead of having one year to maturity,
it has two year to maturity and is priced $1,057.40. What is the
current yield and...

Bond A has a face value of $1,000, makes semiannual coupon
payments of $30 and will mature in 7 years. It currently sells for
$949.63. Bond B is a corporate bond whose price is quoted at 109.98
this afternoon. It will mature in exactly 15 years. Bonds A and B
are priced so that they each have the same yield. What is the YTM
for these two bonds, and what is the coupon rate for Bond B?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 25 minutes ago

asked 26 minutes ago

asked 29 minutes ago

asked 45 minutes ago

asked 45 minutes ago

asked 47 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago