Question 2 A lower bond rating directly translates into a higher, higher interest b. lower, higher interest Oc. higher; higher default d. lower, lower interest O e. higher; lower interest prices and PERS rates on the firm's bonds.
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Question 2 A lower bond rating directly translates into a higher, higher interest b. lower, higher interest Oc. higher; higher default d. lower, lower interest O e. higher; lower interest prices and PERS rates on the firm's bonds.
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- QUESTION 2 Which of the following statements about bond is incorrect? A. • The longer the maturity, the more sensitive the bond's price to changes in yield to maturity. B. Yield to maturity assumes that all bond coupons can be reinvested at the same level of yield to maturity. The relationship between bond prices and yields to maturity is convex. D. The relationship between bond prices and yields to maturity is inverse. E. For a premium bond, the coupon rate is smaller than current yield.1. Bonds with longer maturities will a. fluctuate less when interest rate change b. fluctuate more when interest rate change c. none of the aboved. How does the credit spread change with the bond rating? Why? (Select the best choice below.) A. The credit spread increases as the bond rating falls because lower-rated bonds are riskier. B. The credit spread decreases as the bond rating rises because higher-rated bonds are riskier. C. The credit spread increases as the bond rating rises because higher-rated bonds are riskier. D. The credit spread decreases as the bond rating falls because lower-rated bonds are riskier.
- QUESTION 1 Under what conditions that a discount bond has a negative nominal interest rate? Is it possible for a coupon bond or perpetuity to have a negative nominal interest rate? a)3. Bond prices and yields (S3.1) Construct some simple examples to illustrate your answers to the following:All else the same, a will decrease the required return on a bond. Select one: O a. sinking fund O b. increase in the size of a bond issuance O c. lower bond rating O d. call provision O e. increase in inflation
- while putable bonds are beneficial to the investor when interest rates go down, the downside is that they benefit the issuer when rates go up. True or False? Question 15Answer a. True b. FalseUnder what situation might a bond discount arise when issuing bonds? Select one: a. The coupon rate is less than the effective or yield rate. b. The effective or yield rate is less than the coupon rate. c. The coupon rate is less than the cash rate of interest. d. The effective or yield rate is less than the market rate of interest.A Moving to another question will save this response. Question 7 A callable bonds is an advantage to the therefore their yields are than the non-callable bonds. O Issuer, higher. O Bondholder, higher. O Bondholder, lower. Issuer, lower. A Moving to another question will save this response.
- According to the expectations theory of the term structure, O a when the yield curve is steeply upward-sloping, short-term interest rates are expected to rise in the future. O b. when the yield curve is downward-sloping, short-term interest rates are expected to decline in the future. O c. buyers of bonds prefer short-term to long-term bonds. O d. all of the above. O e. only A and B of the above.The relationship between bond prices and the interest rate bonds pay: Seleccione una: a. is Positive O b. depends on stock prices c. is unrelated d. is inverse or negativeExercise 2.4 Compared to bonds with longer maturity, bonds with shorter maturity respond. dramatically to changes in interest rates.