Question

Which of the following is (are) true?

A) If the yield to maturity is greater than the coupon rate, the
bond will sell at a premium.

B) If the yield to maturity is less than the coupon rate, the bond
will sell at a premium.

C) Market prices and interest rates are positively
correlated.

D) all of the above

Answer #1

Ans is B If the yield to maturity is
less than the coupon rate, the bond will sell at a
premium.

Explanation: Yield to maturity is generally equal to its coupon rate when its sold at par, and Yield to maturity is less than coupon rate when its sold at premium and yield to maturity is more than coupon rate when its sold at discount also market rate is negatively correlated to its interest rate i.e when interest rate increases market price goes down and vice versa.

So as per the rule Option A is incorrect, Option B is correct since YTM < Coupon when sold at premium

Option C is incorrect since market price and interest rate is negatively correlated, only option B is correct so option D is also incorrect.

A discount bond:
Select one:
a. Has a coupon rate which is greater than the yield to
maturity.
b. Has a par value which is less than the market value.
c. Has a coupon rate which is less than the market rate of
interest.
d. Is selling for more than face value.
e. Is the name given to a bond that has been called prior to
maturity.

Choose the CORRECT
statement from the following:
Select one:
a. If a bond’s yield to maturity exceeds its coupon rate, the
bond’s current yield must be less than its coupon rate.
b. All else equal, an increase in interest rates will have a
greater effect on higher-coupon bonds than it will have on
lower-coupon bonds.
c. If two bonds have the same maturity, the same yield to
maturity, and the same level of risk, the bonds should sell for the...

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...

Which one of the following is true? I. A premium bond has a
coupon rate below market interest rate. II. As time passes, price
of zero-coupon bond rises and approaches par value until maturity
date. III. Market interest rate is positively associated with bond
price IV. The longer the maturity of the bond, the greater the
sensitivity of its price to fluctuations in the interest rate. A.
I&II only B. II&IVonly C. I&IV only D. Ionly

Question 1 of 71
The yield to maturity on a coupon bond is …
· always greater than the
coupon rate.
· the rate an investor
earns if she holds the bond to the maturity date, assuming she can
reinvest all coupons at the current yield.
· the rate an investor earns
if she holds the bond to the maturity date, assuming she can
reinvest all coupons at the yield to maturity.
· only equal to the internal
rate of return of a bond...

Southern Airlines issued 25-year bonds with a maturity value of
$2 million. Which statement is true if the
bonds were issued at a premium?
The yield rate of interest exceeded the coupon rate
The cash rate of interest exceeded the coupon rate
The yield rate of interest was less than the coupon rate
The yield rate of interest was greater than the maturity value
of the bonds

14. Which of the following statements is true?
a. If you earn simple interest then you earn interest on the
original amount of principal and interest received
b. The present value of an annuity represents an infinite series
of equal payments
c. If you earn compound interest then you earn interest on the
original amount of principal and interest received
d. The present value of a perpetuity represents a finite series
of equal payments
19. A bond has a market...

The face value of the bond is paid at the maturity of the
bond.
True
False
Which of the following is used as a discount rate while
calculating the bond price?
Yield to Maturity (YTM)
Coupon Rate
Face Value
None
Coupon payments are determined by multiplying face value of the
bond with the coupon rate.
True
False
Which of the following explains the differences in interest
rates?
The length of the investment (maturity premium).
The level of risk of the...

Which one of the following statements is true? Question 13
options: 1) A premium bond has a yield to maturity that is less
than the bond's coupon rate. 2) A discount bond has a coupon rate
that is higher than the bond's yield to maturity. 3) The yield to
maturity on a premium bond exceeds the bond's coupon rate. 4) The
current yield on a par value bond will exceed the bond's yield to
maturity. 5) The current yield on...

Which one of the following is TRUE?
Select one:
a. Yield to maturity of a defaultable bond is lower than
expected return of investing in the bond.
b. Default risk of investment-grade-bonds is greater than that
of speculative-bonds.
c. Investors pay less for bonds with credit risk than they would
for an otherwise identical default-free bonds.
d. During times of uncertainty, credit spread narrows.

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