345 2012 MT with answers

Rise more ri se less c fa ll more d fall less a b for

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Unformatted text preview: , less c.) fa ll , more d) fall , less a .) b) For the following two questi ons, consider a setting where a corporation iss ues a $ 1000 par, I0% coupon bond at time t. but by t+2 recogni zes a temporary cash fl ow crisis is imminent. It announces that it will likel y not be abl e to make its coupon payment for the third period but, if so, will pay a double coupon in the fourth. .1 20. For a CUITent holder of thi s bond. the fi rm 's announcement will _ _ __ maturity on the bond . a.) b.) c .) d) the yield to raise lower leave constant change ambi guously and 2 1. After the aggregate market reacts to the above new . the pri ce of thi s bond wil l / any current holder who sells thi s bond will have a probability of a ca pital loss. a.) ri se, higher h.) c) d.) ri se. lower fall . hi oher ' b fa ll , lower 22 . In the case of a fi xed-coupon perperuitr , a one perce nt fall in this bond 's yield impli es a ______ in its price of _ __ __ rise, exactl y 1% ri se. greater than I% fa ll , less than 1% d.) fall , exactl y 1% a.) b...
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