Question

Which of the following statements is? FALSE? A. The simplest type of bond is a zero?coupon...

Which of the following statements is? FALSE?
A. The simplest type of bond is a zero?coupon bond.
B. Prior to its maturity? date, the price of a zero?coupon bond is always greater than its face value.
C. The amount of each coupon payment is determined by the coupon rate of the bond.
D. Treasury bills are U.S. government bonds with a maturity of up to one year.

Homework Answers

Answer #1

The False Statement is " B. Prior to its maturity? date, the price of a zero?coupon bond is always greater than its face value "

The Price of a Zero Coupen Bond will always be less than it's face value or Par Value irrespectice of it's maturity date. Since the Price of a Bond is calculated by discounting the Face Value or It's Par Value by it's Yield To Maturity [YTM] or the Market Rate

All other remaming following statements are TRUE

The simplest type of bond is a zero?coupon bond.

The amount of each coupon payment is determined by the coupon rate of the bond.

Treasury bills are U.S. government bonds with a maturity of up to one year.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following statements is CORRECT? One advantage of a zero coupon Treasury bond is...
Which of the following statements is CORRECT? One advantage of a zero coupon Treasury bond is that no one who owns the bond has to pay any taxes on it until it matures or is sold. Long-term bonds have less price risk but more reinvestment risk than short-term bonds. If interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less price risk. Relative to a coupon-bearing bond with the same maturity,...
Which of the following statements is CORRECT? One advantage of a zero-coupon Treasury bond is that...
Which of the following statements is CORRECT? One advantage of a zero-coupon Treasury bond is that no one who owns the bond has to pay any taxes on it until it matures or is sold. Long-term bonds have less price risk but more reinvestment risk than short-term bonds. If interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less price risk. Relative to a coupon-bearing bond with the same maturity, a...
Which of the following statements is correct? A) The yield to maturity for a coupon bond...
Which of the following statements is correct? A) The yield to maturity for a coupon bond that sells at its par value consists entirely of an interest yield; it has a zero expected capital gains yield. B) Rising inflation makes the actual yield to maturity on a bond greater than the quoted yield to maturity which is based on market prices. C) all of the above statements are false D)On an expected yield basis, the expected capital gains yield will...
a) Describe the key feature of a zero-coupon bond. (1 mark) b) “The price of a...
a) Describe the key feature of a zero-coupon bond. (1 mark) b) “The price of a zero coupon bond should be equal to its face value.” True or false? Explain. c) “The yield to maturity of a discount bond is greater than its coupon rate.” True or false? Explain. d) You just purchased a 12-year semi-annual coupon bond with a par value of $1,000 and a coupon rate of 7%. The nominal yield to maturity is 6% per annum. Calculate...
a) Describe the key feature of a zero-coupon bond. (1 mark) b) “The price of a...
a) Describe the key feature of a zero-coupon bond. (1 mark) b) “The price of a zero coupon bond should be equal to its face value.” True or false? Explain. c) “The yield to maturity of a discount bond is greater than its coupon rate.” True or false? Explain. d) You just purchased a 12-year semi-annual coupon bond with a par value of $1,000 and a coupon rate of 7%. The nominal yield to maturity is 6% per annum. Calculate...
What is the price of a $1000 face value zero-coupon bond with 4 years to maturity...
What is the price of a $1000 face value zero-coupon bond with 4 years to maturity if the required return on these bonds is 3%? Consider a bond with par value of $1000, 25 years left to maturity, and a coupon rate of 6.4% paid annually. If the yield to maturity on these bonds is 7.5%, what is the current bond price? One year ago, your firm issued 14-year bonds with a coupon rate of 6.9%. The bonds make semiannual...
The government in the U.S. issues zero-coupon bonds up to one-year maturity, but STRIPS are "manufactured"...
The government in the U.S. issues zero-coupon bonds up to one-year maturity, but STRIPS are "manufactured" zero-coupon bonds with maturities up to 30 years. So, for example, a financial institution could first buy 250 30-year coupon bonds issued by the government that each pays $4 of coupon every six months. The institution could then sell the combined coupons totaling $1,000 as a separate zero-coupon bond for each maturity ranging from 6 months up to 30 years. This is a financial...
22. Consider a 2-year zero-coupon bond and a 2-year coupon bond that both have a face...
22. Consider a 2-year zero-coupon bond and a 2-year coupon bond that both have a face value of $100. The coupon bond has a coupon interest rate equal to 5%. Both bonds currently have the same yield to maturity of 6%. Which statement is FALSE? A) Both bonds are trading at a discount. B) The zero-coupon bond is trading at a discount but the coupon bond is trading at a premium. C) The internal rate of return for both bonds...
A "zero coupon bond" (or just "zero") is a bond, that does not pay any interest,...
A "zero coupon bond" (or just "zero") is a bond, that does not pay any interest, it just pays the face value when it matures. Of course nobody would purchase a bond without interest, that's why zero coupon bonds are sold at a discount. Suppose you are given the following information about the current prices of zero coupon bonds: bond: price 1-year zero, face value $1,000 $909.09 2-year zero, face value $1,000 $826.45 3-year zero, face value $1,000 $718.65 I.e....
Which of the following statements is true for zero coupon bonds (other things being equal)? Select...
Which of the following statements is true for zero coupon bonds (other things being equal)? Select one: a. Their price increases as market interest rates rise. b. Their price falls as they approach their maturity date. c. They always trade at a discount. d. Their price remains constant throughout their life.