Question

Other things remaining constant, which corporate bond would command a higher price? A 20 year semi-annual 9% coupon bond with a triple A bond rating or another with a B rating? Justify your answer.

Answer #1

A 20 year semi-annual 9% coupon bond with a triple A bond rating will command a higher Price.

Price of a Bond is dependent on 3 factors- Coupon rate, face value and the required rate of return.

The price of a bond is the discounted value of all coupon payments and the face value.

Ratings are assigned based on the performance and riskiness of the bond

AAA rating bond is less risky, and hence the required rate of return of investors will be lower.

However, a Bond with a B rating has higher risk and hence, will sell for a lower price since the expectations of the investors will be more

Consider a 7-year semi-annual bond with an annual coupon rate of
9% and a bond equivalent yield (BEY) of 12%. If interest rates
remain constant, one year from now the bond’s price will be
__________.
None of the above.
It depends if it is a semi-annual or an annual bond.
Higher.
The same.
Lower.

1. Assuming all else is constant, which of the following
statements is CORRECT?
a. Other things held constant, a
20-year zero coupon bond has more reinvestment risk than a 20-year
coupon bond.
b. Other things held constant,
price sensitivity as measured by the percentage change in price due
to a given change in the required rate of return decreases as a
bond's maturity increases.
c. Other things held constant, for
any given maturity, a 1.0 percentage point decrease in the...

Genesis corp. issued a 20-year semi-annual bond with a face
value of $1,000, and an annual coupon rate of 8%. The bond
equivalent yield (BEY) is 9%. What is the Bond’s price?
$936
$908
$1,080
$1,000
$966

A semi-annual paying callable investment-grade corporate bond
has 3 years remaining until it becomes callable at par, but 7 years
until maturity. Its coupon rate is 7.8% and the current price quote
is 105.74. The appropriate yield measure is the yield-to-__________
and its value is________________.

1. A 100-year corporate bond has a coupon rate of
9% with semi-annual payments. If the current value
of the bond in the marketplace is $400, then what is the
Yield-to-Maturity (YTM)?
2. How much do you pay for a zero coupon government bond that
has a term of 30 years, an interest rate of 9%,
and a par value of $1000.
3. A taxable bond has a yield of 9% and a
municipal bond has a yield of 4.6%....

5. A bond that yields 6% pays a coupon of $20 semi-annually.
Which of the following is most likely the price of the bond?
6. What is the coupon rate for the bond? Assume semi-annual
payments. Answer as a percent!
Bond
Coupon Rate
Yield
Price
t
Apple B
?
5.1%
1012.5
14
semi annual means 6 months.

Two years ago an investor purchased a 4% semi-annual compounding
coupon bond with a remaining maturity of 20 years at a price of (at
that time) 90% of par. Today, i.e. two years after the purchase,
the investor realizes that the bond has exactly the same price like
it had two years ago (i.e. 90%). Based on this information, which
of the following answers is correct:
a) The YTM of the 4% Bond today is the higher than two years...

A 20-year, $1,000 par value bond has a 9% semi-annual coupon.
The bond currently sells for $925. If the yield to maturity remains
at its current rate, what will the price be 8 years from now?
a.
$937.7
b.
$956.95
c.
$939.85
d.
$503.21

A 20-year, $1,000 par value bond has a 9% semi-annual coupon.
The bond currently sells for $925. If the yield to maturity remains
at its current rate, what will the price be 10 years from now? a.
$935.01 b. $930.01 c. $952.84 d. $945.72

You are purchasing a 20-year, semi-annual bond with a current
market price of $973.64. If the yield to maturity is 8.68 percent
and the face value is $1,000, what must the coupon payment be on
the bond?
2.Collingwood Homes has a bond issue outstanding that pays an
8.5 percent coupon and has a yield to maturity of 9.16%. The bonds
have a par value of $1,000 and a market price of $944.30. Interest
is paid semiannually. How many years until...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 36 minutes ago

asked 49 minutes ago

asked 54 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago