If the coupon rate on a bond is 8 percent and current market interest ratesare 6 percent, should this bond be selling at a premium or a discount?
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If the coupon rate on a bond is 8 percent and current market interest rates
are 6 percent, should this bond be selling at a premium or a discount?
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- What is interest rate (or price) risk? Which bondhas more interest rate risk: an annual payment1-year bond or a 10-year bond? Why?If the current interest rate exceeds the bond’s coupon rate, the bond will sell at a ___________.Which of the following is correct? O If you pay a price above its face value to buy a bond, your return will be higher than its coupon rate. O When market rate is greater than coupon rate, the bond has a price below its face value. O When determining the value of a bond that payments semi-annual payments, one need to use semi-annual coupon rate to determine the coupon payments and semi-annual market rate as discount rate.
- Can the price of bond B be determined using the PV function or any other function in excel? What is the EAR (effective annual rate) of these two bonds?Assume that the real risk-free rate is 2% and the average annual expected inflation rate is 4%. The DRP and LP for Bond A are each 2%, and the applicable MRP is 3%. What is Bond A's interest rate?what is the price of the Pybus bonds if they receive an A rating will be $ ?
- QUESTION EIGHTa) What is the relationship between the price of a bond and its YTM? b) Explain why some bonds sell at a premium over par value while other bonds sell at a discount.What do you know about the relationship between the coupon rate and the YTM for premiumbonds? What about for discount bonds? For bonds selling at par value? c) What is the relationship between the current yield and YTM for premium bonds? For discountbonds? For bonds selling at par value? SEBO PLC just paid a dividend of K2.75 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent dividend growth, after which the company will keep a constant growth rate forever. If the required return on SEBO stock is 13 percent, what will a share of stock sell for today?If a company's bonds are selling at a discount, then Select one: a. The current interest rates are below the coupon rate b. The YTM is below the coupon interest rate c. The coupon interest rate is equal to the going interest rate d. The going rate of interest is above the coupon rateWhat is a discount ask yield on a bond? if the bond is priced at 1,000 and 80 days to maturity and has a discount ask yield of 3.4%?
- A bond’s coupon rate is more than the interest rate, therefore the bond is selling at a _____________.1. If a company's bonds are selling at a discount, then Select one: a. The coupon interest rate is equal to the going interest rate b. The going rate of interest is above the coupon rate c. The current interest rates are below the coupon rate d. The YTM is below the coupon interest rateThe bond shown in the following table attached pays interest annually. a. Calculate the yield to maturity (YTM)for the bond. b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain.