If a callable bond is trading at a premium, what yield measure is most appropriate? O a) dividend yield b) yield to maturity c) yield to infinity d) yield to call e) none of the above
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- Describe the differences between the yield to maturity (YTM) and the yield to call (YTC) on a bond. Why would the return to the investor be different if a bond is called? Justify your answerDiscuss the problems with the traditional bond pricing approach by using the yield to maturity?What is the relationship between the yield to maturity and the price of a bond? They are negatively related They are positively related There is no relation O The relation is indeterminant
- Which of the following is NOT a defining quality of a standard bond cash flow? a) Coupon b) Maturity c) Perpetuity Cash Flow d) Face ValueExplain the differences between a bond's yield to maturity (YTM) and its yield to call (YTC). Is there a reason why the return to the investor would alter if a bond is called? Please provide justification for your response.1. Under what conditions would the yield-to-maturity and current yield of a bond be equal? Group of answer choices a. The bond is priced at par b. The bond is priced at a discount c. Insufficient information d. The bond is priced at a premium 2. Which of the following is correct about the risk-free rate as used in valuing equity instruments? Group of answer choices a. The risk-free rate accounts for the rate of return or yield of a government instrument which does not carry any risk. b. The risk-free rate used for valuing equity instruments is normally the yield of a long-term government security. c. The risk-free rate used for valuing equity instruments is the same as that used for valuing short-term debt instruments. d. The risk-free rate accounts for the risks related to government securities which is composed of credit-spread, maturity risk premium and the real risk-free rate. 3. Berg Inc. has just paid a dividend of P2.00. Its stock is now selling…
- Which theory of the term structure proposes that bonds of different maturities are not substitutes for one another? a. Market segmentation theory b. Expectations theory c. Separable markets theory O d. Liquidity premium theoryThe yield to maturity for a bond is equivalent to the market's required return on the bond and is based on risk but the required return on a share of stock ks not based on risk True FalseIn the context of coupon-paying bonds, which of the following are most likely determined bymarket forces?I. The current yield.II. The yield to maturity.III. The coupon rate. A. I only.B. II only.C. I and II only.D. I and III only
- True or False? Macaulay duration of measure of the curvature in the relationship between bond prices and bond yields.How does the price-yield relationship for a callable bond compare to the same relationship for an option-free bond? The price-yield relationship is best described as exhibiting: negative convexity at low yields for the callable bond and positive convexity for the option-free bond the same convexity for both bond types negative convexity for the callable bond and positive convexity for an option- free bondIf a bond's yield to maturity increases, then what happens to current yield? Group of answer choices Not enough information No change Decrease Increase
