Yield and interest rates


Question 1: Which of the following is most correct?

a. The yield on a 2 year corporate bond will always exceed the yield on a 2 year treasury bond.

b. The yield on a 3 year corporate bond will always exceed the yield on a 2 year corporate bond.

c. The yield on a 3 year treasury bond will always exceed the year on a 2 year treasury bond.

d. All of the answers above are correct.

e. Statements a and c are correct.

Question 2: If interest rates fall from 8 percent to 7 percent, which of the following bonds will have the largest percentage increase in its value?

a. a 10 year zero coupon bond

b. a 10 year bond with a 10 percent semiannual coupon

c. a 10 year bond with a 10 percent annual coupon

d. a 5 year zero coupojn bond

e. 5 year bond with a 12 percent annual coupon

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Finance Basics: Yield and interest rates
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