FIN 3100 Ch 6

3Ts Corp. will start selling 10-year bonds today. The bonds have semiannual coupon payments, an annual coupon rate of 8%, and a par value of $1,000. The yield to maturity (YTM) for this bond is expected to be 10%. What is the price of the bond today?

$875.38

The​ ________ is a market derived interest rate used to discount the future cash flows of the bond. A. yield to maturity B. semiannual coupon rate C. compound rate D. coupon rate

A. yield to maturity

correct,6.4-4 Question Help From 1980 to​ 2013, the default risk premium differential between Aaaminus−rated bonds and Baaminus−rated bonds has averaged between​ ________. A. 250 to 350 basis points B. 100 to 200 basis points C. 5 to 15 basis points D. 20 to 50 basis points

B. 100 to 200 basis points

Which of the following statements about the relationship between yield to maturity and bond prices is​ FALSE? A. When the yield to maturity and coupon rate are the​ same, the bond is called a par value bond. B. When interest rates go​ up, bond prices go up. C. A bond selling at a premium means that the coupon rate is greater than the yield to maturity. D. A bond selling at a discount means that the coupon rate is less than the yield to maturity.

B. When interest rates go​ up, bond prices go up.

Which of the following are issued with the shortest time to​ maturity? A. Treasury bonds B. Treasury notes C. Treasury bills D. Treasury stocks

C. Treasury bills

According to bond rating​ agencies, a bond rated​ "AAA" has a higher probability of default than a bond with a​ "BBB" rating. True False

False

The coupon payment for an annual-coupon corporate bond is equal to the yield to maturity multiplied by the par value of the bond. 1) True 2) False

False

Treasury notes and bonds are zero−coupon bonds that sell at a discount while Treasury bills have coupon payments. True False

False

The DDD Corporation has coupon bonds with a $1,000 par value, a 15% annual coupon rate, and currently sell for $938.45. Is the following statement true or false: the Yield to Maturity (YTM) is 15%. (T/F)

False, it is greater than 15%

Question 70 / 4 points The coupon payment for an annual-coupon corporate bond is equal to the yield to maturity multiplied by the par value of the bond. 1) True 2) False

false

The ________ is the return the bondholder receives on the bond if held to maturity. 1) coupon 2) coupon rate 3) yield to maturity 4) par rate

yield to maturity

The ________ is the yield an individual would receive if the individual purchased the bond today and held the bond to the end of its life.

yield to maturity

The DDD Corporation has coupon bonds with a $1,000 par value, a 15% annual coupon rate, and currently sell for $938.45. Is the following statement true or false: the Yield to Maturity (YTM) is greater than 15%. True False

True