To answer questions, assume “All else equal” 6. An increase in the interest rate on a mortgage...

To answer questions, assume “All else equal”

6. An increase in the interest rate on a mortgage will cause an increase/decrease/no change in the mortgage payment, all else equal.

7. If the payout ratio increases, then the stock’s price will increase/decrease/not change.

8. If the price of a stock increases, the dividend yield will increase/decrease/not change.

9. If the yield on a bond decreases, the value of the bond should increase/decrease/not change.

10. A bond that has a coupon rate of 8% should have a higher/lower value than a bond that has a coupon rate of 6%.

11. If the risk-free rate increases, the required return on all stock’s must increase/decrease/not change.

12. If the risk-free rate increases, the value of all stocks must increase/decrease/not change.

Solutions

Expert Solution

Ans- 6	increase
	An increase in the interest rate on a mortgage will cause an increase in the mortgage payment, all else equal.
Ans- 7	increase
	If the payout ratio increases, then the stock’s price will increase .

Ans- 8	decrease
	If the price of a stock increases, the dividend yield will decrease.

Ans- 9	decrease
	If the yield on a bond decreases, the value of the bond should decrease.

Ans- 10	higher
	A bond that has a coupon rate of 8% should have a higher value than a bond that has a coupon rate of 6%

Ans- 11	increase
	If the risk-free rate increases, the required return on all stock’s must increase.

Ans- 12	decrease
	If the risk-free rate increases, the value of all stocks must decrease.

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ekkarill92 answered 10 months ago

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