Questions from General Investment

Q: A bond has a current yield of 9% and a yield

A bond has a current yield of 9% and a yield to maturity of 10%. Is the bond selling above or below par value? Explain.

Q: Is the coupon rate of the bond in Problem 16 more or

Is the coupon rate of the bond in Problem 16 more or less than 9%?

Q: Return to Table 14.1, showing the cash flows for

Return to Table 14.1, showing the cash flows for TIPS bonds. a. What is the nominal rate of return on the bond in year 2? b. What is the real rate of return in year 2? c. What is the nominal rate of r...

Q: A newly issued 20-year maturity, zero-coupon bond

A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 8% and face value $1,000. Find the imputed interest income in (a) the first year; (b) the second year; and (c) t...

Q: Two bonds have identical times to maturity and coupon rates. One

Two bonds have identical times to maturity and coupon rates. One is callable at 105, the other at 110. Which should have the higher yield to maturity? Why?

Q: A 10-year bond of a firm in severe financial distress

A 10-year bond of a firm in severe financial distress has a coupon rate of 14% and sells for $900. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to...

Q: Suppose that today’s date is April 15. A bond with a

Suppose that today’s date is April 15. A bond with a 10% coupon paid semiannually every January 15 and July 15 is quoted as selling at an ask price of 101.25. If you buy the bond from a dealer today,...

Q: Which of the following most accurately describes the behavior of credit default

Which of the following most accurately describes the behavior of credit default swaps? a. When credit risk increases, swap premiums increase. b. When credit and interest rate risk increase, swap premi...

Q: The 6-month Treasury bill spot rate is 4%, and

The 6-month Treasury bill spot rate is 4%, and the 1-year Treasury bill spot rate is 5%. What is the implied 6-month forward rate for six months from now?

Q: The stated yield to maturity and realized compound yield to maturity of

The stated yield to maturity and realized compound yield to maturity of a (default-free) zerocoupon bond are always equal. Why?