Question

A 10-year bond with a 8% annual coupon has a yield to maturity of 9%. Which of the following statements is CORRECT?

a. The bond’s current yield is greater than 9%.

b. If the yield to maturity remains constant, the bond’s price one year from now will be higher than its current price.

c. The bond is selling above its par value.

d. If the yield to maturity remains constant, the bond’s price one year from now will be lower than its current price.

e. The bond is selling at a premium.

Answer #1

Given about a bond,

Years to maturity = 10 years,

coupon rate = 8%

Face value = $1000

Coupon = 8% of 1000 = $80

YTM = 9%

Using financial calculator to find price of the bond, use following values:

FV = 1000

N = 10

PMT = 80

I/Y = 9

compute for PV, we get PV = -935.82

So, price of the bond = $935.82

current yield = Coupon/price = 80/935.82 = 8.55%

So, option a is incorrect.

Bond is selling at discount and its price is less than its par value, so option c and e are incorrect.

As we move toward years to maturity, price of the bond moves to its par value. So, for this bond, price of the bond increase and will be higher than the price of the same bond last year with same YTM.

So, only option b is correct.

A 10-year corporate bond has an annual coupon of 9% and a par
value of $1,000. The bond is currently selling at a premium of 20%
to par ($1,200). Which of the following statements is more likely
to be CORRECT?
a. The bond’s yield
to maturity is 9%.
b. The bond’s current
yield is 9%.
c. IF the bond’s
yield to maturity remains constant over the next year, an investor
owning the bond will earn a capital GAIN of 11%...

A bond has an 8 percent annual coupon and a yield to maturity
equal to 7.5 percent. Which of the following statements is most
correct?
a. If the yield to maturity remains constant, the price of the
bond is expected to increase over time.
b. The bond has a current yield greater than 8 percent.
c. If the bond is callable, the YTM is a better estimate of this
bond’s expected return.
d. The bond price will decrease when there...

Consider a 20-year bond with an annual coupon of 10%.
The coupon rate will remain fixed until the bond matures. The bond
has a yield to maturity of 8%. Which of the following statements is
correct?
1) The bond should currently be selling at its par
value.
2) If market interest rates decline, the price of the
bond will also decline.
3) If market interest rates remain unchanged, the bond’s
price one year from now will be higher than it...

A 10-year corporate bond has an annual coupon payment of 5.3%.
The bond is currently selling at par ($1,000). Which of the
following statement is not correct? Why?
The bond’s capital gain yield is 5.3%.
The bond’s yield to maturity is 5.3%.
The bond’s current yield is 5.3%.
If the bond’s yield to maturity remains constant, the bond’s
price will remain at par.

Consider a bond with a 10% coupon and with yield to maturity =
8%. If the bond’s YTM remains constant, then in one year, will the
bond price be higher, lower, or unchanged? Please explain your
answer and give examples to help demonstrate your
explanation.

QUESTION 7
A 10-year bond pays an annual coupon, its YTM is 8%, and it
currently trades at a premium. Which of the following statements is
CORRECT?
The bond’s coupon rate is less than 8%
The bond’s coupon rate is more than 8%
The bond’s coupon rate is equal to 8%
The bond’s current yield is less than 8%.
The bond’s current yield is equal to 8%
QUESTION 10
If a stock's dividend is expected to grow at a constant...

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.

A 10-year bond pays an annual coupon, its YTM is 8%, and it
currently trades at a premium. Which of the following statements is
CORRECT? The bond’s coupon rate is equal to 8% The bond’s current
yield is less than 8%. The bond’s current yield is equal to 8% The
bond’s coupon rate is less than 8% The bond’s coupon rate is more
than 8%

1.A 12-year bond has a 9 percent annual coupon, a yield to
maturity of
11.4 percent, and a face value of $1,000. What is the price of the
bond?
2.You just purchased a $1,000 par value, 9-year, 7 percent
annual coupon bond that pays interest on a semiannual basis. The
bond sells for $920. What is the bond’s nominal yield to
maturity?
a. 7.28%
b. 8.28%
c. 9.60%
d. 8.67%
e. 4.13%
f. None of
the above
3.A bond with...

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.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 6 minutes ago

asked 27 minutes ago

asked 30 minutes ago

asked 37 minutes ago

asked 50 minutes ago

asked 55 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago