Coupon bond could trade for an amount above its par value

Assignment Help Financial Management
Reference no: EM131332082

Which of the following is most correct?

A- if the coupon bond is selling at par, it's current yield equals its yield to maturity.

B- if rates fall after its issue, a zero coupon bond could trade for an amount above its par value.

C- a zero coupon bonds current yield is equal to its yield to maturity

D- all the above

Reference no: EM131332082

Questions Cloud

Different cookie-baking ovens : You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $70,500, has a 5-year life, and has an annual OCF (after tax) of –$11,400 per year. The Keebler CookieMunster costs $97,000, has a 7-year life, and has an annual OCF (after..
Alternatively invest these proceeds : You have a savings bond that pays $10,000 in 10 years. What could you sell it for today if interest rates are 5% APR compounded semi-annually. You could alternatively invest these proceeds at 4.95% APR compounded continuously.
Bonds yield to maturity increases : All else equal, if a bonds yield to maturity increases, it's price will fall. A zero coupon bond pays no interest. It is offered at par value, which is where it sells initially. If the appropriate rate of interest on a bond is greater than its coupon..
What will the cash flows for this project be : You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACRS 3-year class(1 yr 33.33%2 yr 44.45% 3 yr 14.81%) , and it will be sold after three ye..
Coupon bond could trade for an amount above its par value : if the coupon bond is selling at par, it's current yield equals its yield to maturity. if rates fall after its issue, a zero coupon bond could trade for an amount above its par value. a zero coupon bonds current yield is equal to its yield to maturit..
Why are the cash flows of a purely domestic firm : Exposure of Domestic Firms: Why are the cash flows of a purely domestic firm exposed to exchange rate fluctuation? Are purely domestic firms subject to transaction exposure, translation exposure, and economic exposure?
Important to understanding the financial statements : For fun, locate the notes to the financial statements located in the annual report of any company you choose. Tell us something unusual or important you found there. Why did you pick it or why do you think it may be important to understanding the fin..
What is your best estimate of aftertax cost of debt : Shanken Corp. issued a 25-year, 8 percent semiannual bond 3 years ago. The bond currently sells for 93 percent of its face value. The book value of the debt issue is $45 million. The company’s tax rate is 35 percent. What is the company's total book ..
Predict few years of dividends before buying : You are looking at a new stock and would like to predict a few years of dividends before buying it. The company recently had a dividend of $1. For the next 3 years, dividends will grow 4% each year, 6% the following year and a constant growth every y..

Reviews

Write a Review

Financial Management Questions & Answers

  What will be the realized compound yield to maturity

A 2-year bond with par value $1,000 making annual coupon payments of $80 is priced at $980. What is the yield to maturity of the bond? What will be the realized compound yield to maturity if the one-year interest rate next year turns out to be   8%.

  Shares of common stock outstanding-earnings per share

Makers Corp. had additions to retained earnings for the year just ended of $313,000. The firm paid out $177,000 in cash dividends, and it has ending total equity of $4.82 million. The company currently has 140,000 shares of common stock outstanding. ..

  What is the effective annual cost of trade credit

Pets Store Inc. sells on terms of 2/15, net 70. What is the effective annual cost of trade credit under these terms? Use a 365-day year. A retailer with high inventory turnover is likely to have

  Higher beta stocks are expected to have a lower return rate

A stock that is more volatile than the market will have a Beta of more than 1.0. Stock As beta is 1.0 this means the stock moves in the same direction and magnitude as the market. Higher beta stocks are expected to have a lower return rate.

  Constant growth-what is stocks current value per share

Thomas Brothers is expected to pay a $3.3 per share dividend at the end of the year (that is, D1 = $3.3). The dividend is expected to grow at a constant rate of 3% a year. The required rate of return on the stock, rs, is 17%. What is the stock's curr..

  What is the profit of the straddle when stock price

What’s the profit of the “Straddle” when stock price is $25, $30, $35, $40, $45, $50, $55, and $60 respectively?

  What is meant by the terms sweet spot and discretionary area

Explain in your own words what is meant by the terms Sweet Spot and Discretionary Area. Explain the significance of a security decision that is located to the right of the Sweet Spot but outside the Discretionary Area.

  Large number of articles about venture capital

Of the approximately 534,000 companies that started in the year 2010, only 2,749 received funding from venture capitalists. If just this small percentage actually received venture capital, why do small business magazines print such a disproportionate..

  After the dividend is paid-farrah owns

Farrah owns 5,000 shares of stock in DAS, Inc. with a market value of $15,000.DAS declares a 20% stock dividend. After the dividend is paid, Farrah owns

  What determines whether to use the dividend growth model

If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock? Explain the difference between WACC and MCC. What determines whether to use the dividend growth model approach or the CAPM..

  A local finance company quotes an interest rate

A local finance company quotes an interest rate of 19.7 percent on one-year loans. So, if you borrow $47,000, the interest for the year will be $9,259. Because you must repay a total of $56,259 in one year, the finance company requires you to pay $56..

  Why is the value irrelevant for an american put

Call prices are directly related to the stock's volatility, yet higher volatility means that the stock price can go lower.- How would you resolve this apparent paradox?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd