1. Compare 30-year bond to a 5-year bond all else equal. Which one is more sensitive...

1. Compare 30-year bond to a 5-year bond all else equal. Which one is more sensitive to interest rate changes. Why? Please explain.

2. AAA, Inc. currently has an issue of bonds outstanding that will mature in 31 years. The bonds have a face value of $1,000 and a stated annual coupon rate of 20.0% with annual coupon payments. The bond is currently selling for $890. The bonds may be called in 4 years for 120.0% of the par value ($1200). What is your expected quoted annual rate of return if you buy the bonds and hold them until maturity?

3. BBB, Inc. bonds have a par value of $1,000, a 33-year maturity, and an annual coupon rate of 12.0% with annual coupon payments. The bonds are currently selling for $923. The bonds may be called in 4 years for 112.0% of par ($1120). What quoted annual rate of return do you expect to earn if you buy the bonds and company calls them when possible?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

20. Which of the following statements about a bond is true? All else being equal, the...

20. Which of the following statements about a bond is true? All else being equal, the lower the coupon rate on a bond, the higher the price of the bond The value of a bond cannot be traded in the market at its face value If the yield curve is downward sloping, long-term yields are lower than short-term yields because market interest rates are expected to decrease. If the yield curve is downward sloping, long-term yields are lower than short-term...

All else being equal, for rolling element bearings, which is more damaging? They are equivalent. outer...

All else being equal, for rolling element bearings, which is more damaging? They are equivalent. outer ring rotation. Stop worrying--they're both fine! inner ring rotation.

5) All else being equal, if a nation decided to intervene in free trade anyways, which...

5) All else being equal, if a nation decided to intervene in free trade anyways, which of the following policy options would be most beneficial to the country and which would be the least beneficial? Please explain your answer clearly for full credit: Tariffs, Quotas and Voluntary Export Restraints

Which one of the following will decrease the cash flow from assets, all else equal? Select...

Which one of the following will decrease the cash flow from assets, all else equal? Select one: a. decrease in the change in net working capital b. increase in cash flow to stockholders c. increase in cash flow to creditors d. increase in net capital spending e. increase in operating cash flow

All else equal, the more people save, the higher the demand for debt capital will be,...

All else equal, the more people save, the higher the demand for debt capital will be, resulting in higher interest rates. Group of answer choices True False

Firm A’s management is very conservative whereas Firm B’s is more aggressive. All else equal, which...

Firm A’s management is very conservative whereas Firm B’s is more aggressive. All else equal, which firm would probably have larger holdings of marketable securities? Explain your answer. Give an example of communication style for Firm A and Firm B and why each may be effective or ineffective.

19. Which bond is more sensitive to an interest rate change of 0.75%? Bond A: YTM...

19. Which bond is more sensitive to an interest rate change of 0.75%? Bond A: YTM = 4.00%, maturity = 8 years, coupon = 6% or $60, par value = $1,000. Bond B: YTM = 3.50%, maturity = 5 years, coupon = 7% or $70, par value = $1,000. bond A both are equally sensitive bond B cannot be determined

To answer questions, assume “All else equal” 21. A bond that has a yield of 4%...

To answer questions, assume “All else equal” 21. A bond that has a yield of 4% and a coupon rate of 5% must have price that is higher than/lower than a zero-coupon bond. 22. A bond that is callable is likely to be called when yields are higher than/lower than/equal to its coupon rate.

Assuming all else is equal, which of the following loans is most likely to have the...

Assuming all else is equal, which of the following loans is most likely to have the lowest total interest cost? Secured non-amortizing loan Secured amortizing loan Unsecured amortizing loan Unsecured non-amortizing loan

To answer questions, assume “All else equal” 13. A municipal bond must have a yield to...

To answer questions, assume “All else equal” 13. A municipal bond must have a yield to maturity that is higher/lower/equal to the yield to maturity on a similar corporate bond. 14. An investment has a 3% rate which compounds quarterly, therefore it must have an EAR that higher than/lower than/equal to an investment that has a 1% rate which compounds monthly. 15. An investment has a 3% rate which compounds quarterly, therefore it must have an APR that higher than/lower...

Subjects