Questions from General Investment

Q: A bond with an annual coupon rate of 4.8%

A bond with an annual coupon rate of 4.8% sells for $970. What is the bond’s current yield?

Q: Which security has a higher effective annual interest rate? a

Which security has a higher effective annual interest rate? a. A 3-month T-bill selling at $97,645 with par value $100,000. b. A coupon bond selling at par and paying a 10% coupon semiannually.

Q: Treasury bonds paying an 8% coupon rate with semiannual payments currently

Treasury bonds paying an 8% coupon rate with semiannual payments currently sell at par value. What coupon rate would they have to pay in order to sell at par if they paid their coupons annually? (Hint...

Q: Consider a bond with a 10% coupon and yield to maturity

Consider a bond with a 10% coupon and yield to maturity = 8%. If the bond’s yield to maturity remains constant, then in one year, will the bond price be higher, lower, or unchanged? Why?

Q: Under the expectations hypothesis, if the yield curve is upward-

Under the expectations hypothesis, if the yield curve is upward-sloping, the market must expect an increase in short-term interest rates. True/false/uncertain? Why?

Q: Under the liquidity preference theory, if inflation is expected to be

Under the liquidity preference theory, if inflation is expected to be falling over the next few years, long-term interest rates will be higher than short-term rates. True/false/uncertain? Why?

Q: If the liquidity preference hypothesis is true, what shape should the

If the liquidity preference hypothesis is true, what shape should the term structure curve have in a period where interest rates are expected to be constant? a. Upward-sloping. b. Downward-sloping. c....

Q: Assuming the pure expectations theory is correct, an upward-sloping

Assuming the pure expectations theory is correct, an upward-sloping yield curve implies: a. Interest rates are expected to increase in the future. b. Longer-term bonds are riskier than short-term bond...

Q: The following is a list of prices for zero-coupon bonds

The following is a list of prices for zero-coupon bonds of various maturities. Maturity (years) Price of Bond 1……………………………… $943.40 2……………………………….. 898.47 3…………………………………847.62 4………………………………….792.16...

Q: The tables below show, respectively, the characteristics of two annual

The tables below show, respectively, the characteristics of two annual-coupon bonds from the same issuer with the same priority in the event of default, as well as spot interest rates on zero coupon b...