What happens to the bond coupon rate and current yield

Assignment Help Financial Management

Reference no: EM132014432

1. A 30-year Treasury bond is issued with a face value of $1,000 and makes coupon payments of $20 every six months. If relevant market yields decrease shortly after the Treasury bond is issued, what happens to the bond’s coupon rate, current yield, and yield to maturity?

A. all three increase

B. all three decrease.

C. the coupon rate increases, the current yield increases, and the yield to maturity decreases.

D. the coupon rate stays the same, the current yield decreases, and the yield to maturity decreases.

E. the coupon rate stays the same, the current yield increases, and the yield to maturity increases.

2. A release of economic data suggests that the economy is heading for good times, an expansionary period, but that inflationary pressures are increasing. Under such circumstances, the Treasury yield curve is likely to:

A. Increase its upward slope

B. Increase its downward slope

C. Remain unchanged

Reference no: EM132014432

Questions Cloud

Economic value added of proposed new line of energy drinks : Calculate the economic value added of the proposed new line of energy drinks.

Calculate the free cash flow for big top : Calculate the free cash flow for Big Top for the most recent fiscal year.

What is one share of this stock worth to you today : What is one share of this stock worth to you today if you require a 14 percent rate of return?

What strategy you will apply to reap that profit : do you see any arbitrage profit opportunity in this case? If yes, what strategy you will apply to reap that profit?

What happens to the bond coupon rate and current yield : If relevant market yields decrease shortly after the Treasury bond is issued, what happens to the bond’s coupon rate, current yield, and yield to maturity?

Make money with zero initial investment and no risk : Explain precisely the transactions you could use (being careful about currency of denomination) to make money with zero initial investment and no risk.

What price of stock at expiry will allow you to break even : Explain with the help of a profit graph what price of the stock at expiry will allow you to break even?

What is the convenience yield : What is the cost of carry here? What is the convenience yield?

Corporation enters bankruptcy and liquidates assets : If a corporation enters bankruptcy and liquidates assets, seniority (i.e., which group gets paid first, second, and last) is as follows:

User Account

All Pages