EgreghrehredhWhen it decrease. Bond prices and interest rates are
negatively related: When the interest rate rises, the price of the bond
must fall. So when the yield to maturity increases, bondholders fare
better.
1. A financial adviser has just given yo
Chapter 4
1. Would a dollar tomorrow be worth more to you today when the interest
rate is 20% or when it is 10%?
Less. It would be worth 1/(1+0.20)=$0.83 when the interest rate is
20%, rather than 1/(1+0.10)=$0.91 when the interest rate is 10%.
2. Write d
Chapter 4
1. Would a dollar tomorrow be worth more to you today when the interest
rate is 20% or when it is 10%?
Less. It would be worth 1/(1+0.20)=$0.83 when the interest rate is
20%, rather than 1/(1+0.10)=$0.91 when the interest rate is 10%.
2. Write d
1. When is the current yield a good approximation of the yield to
maturity?
2. Why would a government choose to issue a perpetuity, which requires
payments forever, instead of a terminal loan, such as a fixed-payment
loan, discount bond, or coupon bond?
3
1. Why would a government choose to issue a perpetuity, which requires
payments forever, instead of a terminal loan, such as a fixed-payment
loan, discount bond, or coupon bond?
2. Under what conditions will a discount bond have a negative nominal
interes
EgreghrehredhWhen it decrease. Bond prices and interest rates are
negatively related: When the interest rate rises, the price of the bond
must fall. So when the yield to maturity increases, bondholders fare
better.
1. A financial adviser has just given yo
1. Under what conditions will a discount bond have a negative nominal
interest rate? Is it possible for a coupon bond or a perpetuity to have a
negative nominal interest rate?
2. True or False: With a discount bond, the return on the bond is equal to
the
1. Under what conditions will a discount bond have a negative nominal
interest rate? Is it possible for a coupon bond or a perpetuity to have a
negative nominal interest rate?
2. True or False: With a discount bond, the return on the bond is equal to
the
1. True or False: With a discount bond, the return on the bond is equal to
the rate of capital gain.
.
2. If interest rates decline, which would you rather be holding, long-term
bonds or short-term bonds? Why? Which type of bond has the greater
interest-r
1. Under what conditions will a discount bond have a negative nominal
interest rate? Is it possible for a coupon bond or a perpetuity to have a
negative nominal interest rate?
2. True or False: With a discount bond, the return on the bond is equal to
the