Market interest rates do not change during the life of bond

Assignment Help Financial Management
Reference no: EM131549498

If you buy a bond that is selling at a discount to its maturity value, what will happen to the price (value) of the bond as the maturity date nears if market interest rates do not change during the life of the bond?

a. Because interest rates remain constant, nothing happens to the market value of the bond.

b. The price of the bond should decrease even further below the bond's face value because the rates in the market are too high.

c. The required rate of return for the bond must be less than the bond's coupon interest rate.

d. The price of the bond will increase as the bond gets closer to its maturity because the bond's value has to equal its face value at maturity.

e. None of the above is a correct answer.

Reference no: EM131549498

Questions Cloud

Calculate percentage changes in roe for economic expansion : Calculate the percentage changes in ROE for economic expansion and recession.
Describe one general trend related to health care : Read "Key Features of the Affordable Care Act by Year," located on the U.S. Department of Health & Human Services website, that is found in the Topic Materials.
The overseas private investment corporation : The Overseas Private Investment Corporation (OPIC)
Employee empowerment-empowerment : Employee Empowerment: Empowerment means giving employees greater involvement in their jobs and in the operations of the organization
Market interest rates do not change during the life of bond : what will happen to the price (value) of the bond as the maturity date nears if market interest rates do not change during the life of the bond?
Describe a budgeting system at any governmental level : Describe a budgeting system at any governmental level. Use technology and information resources to research issues in public budgeting and finance.
Which interpretation of gabriels epiphany at the end : Which interpretation of Gabriel's epiphany at the end of "The Dead" do you find most compelling in the context of the both the story itself?
Correlational analysis using student test scores : The first question that comes to mind in this scenario is; what type of data was collected and how was it collected throughout the semester to determine.
Demonstrate that workflow projects : Organizational leaders are required to demonstrate that workflow projects requiring an investment in technology are successful.

Reviews

Write a Review

Financial Management Questions & Answers

  What is its self supporting growth rate

Maggie’s Muffins, Inc., generated $5,000,000 in sales during 2013, and its year-end total assets were $2,500,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..

  Calculate the simple annual rates of return

With reference to case study session 1, obtain the Dow Jones Islamic Index over a recent 15 year period. Then answer the following questions. End of Dow Jones Islamic Year Index 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 20..

  Determine the expected profit or loss

Kurnick Co. expects that the pound will depreciate from $1.70 to $1.68 in one year. It has no money to invest, but it could borrow money to invest. It has been approved by a bank to borrow either 1 million dollars or 1 million pounds for one year. De..

  Outdoor sports is considering adding a miniature golf

Outdoor Sports is considering adding a miniature golf course to its facility. The course would cost $138,000, would be depreciated on a straight-line basis over its five-year life, and would have a zero salvage value. The project will require $3,000 ..

  Liquidity is more important than minimizing basis risk

why do you think maximizing liquidity is more important than minimizing basis risk?

  Prepare projected financial statements for nestle sa

Purpose: This exercise is designed to give you experience preparing projected financial statements. Pro forma analysis is a central strategy-implementation.

  Assume perfect capital markets and no taxation

A company's debt is given by a bond that will mature in two years. After two years the company will terminate all activity. The company unlevered equity value in two years can be $17 millions with a 50% probability or $14 millions with probability 50..

  Calculate the implied share price of firm

Two firms each have reported EPS of $5 per share. Firm A has reported that 80% of their earnings are “permanent” earnings, while 20% are one-time “transitory” earnings. Firm B has reported that 60% of their earnings are “permanent” earnings, while 20..

  Present value of a perpetuity making quarterly payments

A business borrows $296,926 for 9 years at an annual rate of interest of 6%. If payments are annual and the loan will negatively amortize by $49,469, what will be the annual payment required? What is the present value of a perpetuity making quarterly..

  What was the cash advance fee

What was the cash advance fee? What was the total amount she paid? What was the interest for one month at an APR of 18 percent?

  Short-term profits at expense of long-term profits

Corporate Ethics. Is it unfair or unethical for corporations to create classes of stock with unequal voting righStock Valuation. Evaluate the following statement: Managers should not focus on the current stock value because doing so will lead to an o..

  Ow much interest will you pay over the twenty years

You take out a $200,000 mortgage for 20 years at 6%. What is your monthly payment? What is the principle and interest on the first payment? What is the principle and interest on the twelfth payment? How much interest will you pay over the 20 years?

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