is the premium to compensate for the price change expected to occur over the lif

Question

is the premium to compensate for the price change expected to occur over the life of the bond or investment instrument. a. Inflation-risk premium b. Maturity premium Real risk-free interest rate premiunm d. Default-risk premium 10.A corporation bond is currently selling for $850. The bond matures in 20 years, has a face value of $1.000, and a yield to maturity of 10.55%. The bond's coupon rate is a. b. . d. 8.72%. 10.55%. 5.27%. 13% 11.Assume that a company has an issue of 18-year $1,000 par value bonds that pay 7% interest, annually. further assume that today's required rate of return on these bonds is 5%. How much would these bonds sell for today? Round off to the nearest $1. a. $1,233.79 b. $1,201.32 c. $1,134.88 d. $1,032.56

Explanation / Answer

Answers:

9Q. The ________ is the premium to compensate for the price change expected to occur over the life of the bond or investment instrument.

9 Ans.The inflation-risk premiumis the premium to compensate for the price change expected to occur over the life of the bond or investment instrument..

Hence option- (A) is correct answer.

10Q. A corporation bond is currently $850.The bond matures in 20-years, has a face value of $1000, and a yield to maturity of 10.55% . the bond's coupon rate is:

10Ans . A corporation bond is currently $850.The bond matures in 20-years, has a face value of $1000, and a yield to maturity of 10.55% . the bond's coupon rate is :option-(A)- 8.72%.

Hence option-(A) is correct answer.

11Q. Assume that a company has an issue of 18 year $1000 par value bonds that pay 7% interest, annually.further assume that todays required rate of return on these bonds is 5%.How much would these bonds sell for today? round off to the nearest $1 .

11Ans.  Assume that a company has an issue of 18 year $1000 par value bonds that pay 7% interest, annually.further assume that todays required rate of return on these bonds is 5%.How much would these bonds sell for today? round off to the nearest $1  

Option-(A)- $1233.79

Hence option-(A) is correct answer.

12Q. which of the following affect an asset's value to an investor?

12 Ans.

I) amount of an asset's expected cash flow
II) the riskiness of the cash flows
IV) Investor's required rate of return

I,II,IV is the correct answer.

option-(C) is correct answer

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