Reference no: EM131016169
Which of the following statements about bonds are true?
Select all that applies.
a. If the value of a bond B0 is less than its par value, the bond is selling at a premium.
b. The yield to maturity on a bond with a current price equal to its par value will always equal the coupon interest rate.
c. Bonds on short maturities will have less interest rate risk than bonds with longer maturities and equal features.
d. As market interest rates increase bond prices increase.
e. The longer the period until a bond matures, the less a change in market interest rates will affect its market value.
f. The discount rate of a bond is synonymous with the bond’s required return.
Which of the following statements about bonds are false? Select all that applies.
A bond that is issued at a premium has a coupon interest rate that is higher than the market rate.
b. The only variable that can cause the value of a bond at any particular point in time to increase or decrease is a change in the bondholder’s required rate of return.
c. Debentures are unsecured long-term debt.
d. A bond’s value equals the present value of interest and principal the owner will receive.
e. The yield to maturity of a bond is the current value of the bond.
f. If the market price of a security is larger than the value assigned to the security by an investor, then the expected rate is greater than the required rate of return.
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