f12 Use the Zero Coupon Bond information above to answerthis question.You have $9,000 to invest, and you do not need to collecton your investment for 15 years.• Option 1: You can buy a zero coupon bond with a facevalue of $12,000 that matures in 15 years.• Option 2: You can deposit the money into a CDaccount that matures in 15 years with an annualpercentage yield (APR) of 4.515%.Which option should you choose? Enter 1 or 2. Zero Coupon BondA zero coupon bond is a bond that is sold now at adiscount and will pay its face value when it matures. Nointerest payments are made.

Future Value:It is calculated by compounding the present amount with an appropriate interest…

Answered: Use the Zero Coupon Bond information…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 11MC

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A zero coupon bond is a bond that is sold now at a discount and will pay its face value when it matures. No interest payments are made.
On the maturity date of a bond, the bond owner receives: Group of answer choices O. the face value only O. a coupon payment only O. a coupon payment plus the face value O. a coupon payment plus the purchase price O. the purchase price only Don't use chatgpt
It is the amount of money that will receive at the bond's maturity date. coupon discount rate par value interest plus penalty principal plus interest no choice given
When a bond sells at a discount, the carrying value ________ after each amortization entry. A. increases B. decreases C. stays the same D. cannot be determined
A trasury security in which periodoc coupon interest payments can be seperate from eachother ad from the orinciple payment is called a: A. STRIP B. T-notes C. T-Bonds D. G. O. Bond E. Revenue bond
If a coupon-paying bond is selling at a discount, the bond's yield to maturity will be _______ than the bond's coupon interest rate. less equal more
Calculating the risk premium on bonds The text presents a formula where (1+1) = (1-p)(1 +i+x) + p(0) where i is the nominal interest rate on a riskless bond x is the risk premium p is the probability of default (bankruptcy) If the probability of bankruptcy is zero, the rate of interest on the risky bond is When the nominal interest rate for a risky borrower is 8% and the nominal policy rate of interest is 3%, the probability of bankruptcy is %. (Round your response to two decimal places.) When the probability of bankruptcy is 6% and the nominal policy rate of interest is 4%, the nominal interest rate for a risky borrower is %. (Round your response to two decimal places.) When the probability of bankruptcy is 11% and the nominal policy rate of interest is 4%, the nominal interest rate for a risky borrower is %. (Round your response to two decimal places.) The formula assumes that payment upon default is zero. In fact, it is often positive. How would you change the formula in this case?…
Please see attached. Definitions: Zero-coupon bond is a bond that pays no coupons over its maturity. Yield to maturity (YTM) is the return the bond holder receives on the bond if held to maturity. Par value is the principal amount to be repaid at the maturity of the bond. Maturity date is the expiration date of the bond on which the final interest payment is made as well as the principal repayment.
Which type of bonds offer a higher yield? Callable bonds Noncallable bonds Answer the following question based on your understanding of interest rate risk and reinvestment risk. True or False: Assuming all else is equal, the shorter a bond's maturity, the more its price will change in response to a given change in interest rates. False True
What relationship between the required return (ytm) and the coupon interest will cause a bond to: a) Be priced at a discount¿ FALL2022 b) Be priced at a premium? c) Be priced at its par value?
When the bond reaches its ______ the company repays the / its _______ maturity date; creditor payment due: interest amortization due: coupon rate all of the choices maturity date investor
Write the formulae of: Zero-coupon Bond & Non-zero coupon Bond Ordinary Annuity & Annuity Due (Present Value) Ordinary Annuity & Annuity Due (Future Value) Simple Interest & Compound Interest Perpetual Bond

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