3 Which of the Following Are True for Discount Bonds

By Ra_Melanie32 25 Apr, 2022 Post a Comment

Treasury bonds and notes are examples of discount bonds. It also refers to bonds whose coupon rates are lower than the market interest rate and thus trade for less than their face value in the secondary market.

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1 Which of the following are TRUE for discount bonds.

. Its fixed when the bond is being. C Both are true. C At maturity the bond will repay an amount that is less than the face value.

A The bond makes no coupon payments. It is also called a pure discount bond or deep discount bond. When bondholders perceive the issuer as being at a higher risk of defaulting on their obligations they may only be willing to purchase the bonds at a discount.

II A discount bond is bought at a price below its face value and the face value is repaid at the maturity date. B The price of a coupon bond and the yield to maturity are negatively related. A zero coupon bond pays interest each period B.

Plot the zero-coupon yield curve for the first five years. Your information is incomplete as the options arent given. 1 Which of the following are TRUE for discount bonds.

Neither bond discount nor premium is amortized. D The purchaser receives the par value at maturity plus any capital gains. Suppose that you purchased a bond a year ago and over the past year the market interest rate increases.

Are an example of a zero-coupon bond. Treasury bonds and notes are examples of discount bonds. B The purchaser receives the face value of the bond at the maturity date.

Bond premium is amortized but bond discount is not. Bond issuers risk of default. B The stated interest rate is higher than the prevailing market interest rate.

What is a coupon rate. For fill-in-the-blank questions press or click on the blank space provided. Zero coupon bonds are issued at below par value E.

7Coupon500 Basis10463Coupon500 Basis6Coupon500 Basis101The difference in price between the 6 and 7 bonds is 3 points. 1000 40 1 0053. Which of the following are true about Zero coupon bonds more than one may be true.

Up to 25 cash back Question 1 Which of the following is true regarding bond discounts andor premiums. Therefore each bond will be priced at 83879 and said to be traded at a discount bond price lower than par value because the coupon rate Coupon Rate The coupon rate is the ROI rate of interest paid on the bonds face value by the bonds issuers. It determines the repayment amount made by GIS guaranteed income security.

D The purchaser receives the par value at maturity plus any capital gains. Treasury bonds and notes are examples of discount bonds. B The purchaser receives the face value of the bond at.

3 The interest rate that equates the present value of payments received from a debt. B The purchaser receives the face value of the bond at the maturity date. Issued 10000000 of corporate bonds with 38-year maturity four years ago.

101 90. The coupon rate simply means the annual income that an investor can expect to receive when he or she holds a particular bond. Therefore an overview of the coupon rate will be given.

A A discount bond is bought at par. 17- 3 points - Which of the following is true of a zero coupon bond. Maturity years 12345 Price per 100 face value 9551 9105 8638 8165 7651 a.

Botid has no value until the year it matures because there are no positive cash flows until 10 - 3 points - Put. B The bond sells at a premium prior to maturity. D The bond will be issued for an amount less than the face value.

B The purchaser receives the face value of the bond at the maturity date. Zero coupon bonds are issued at a. The market value of a zero coupon bond is just the discounted value of the final par value payment.

Depending on the length of time until maturity zero-coupon bonds can be issued at substantial discounts to par sometimes 20 or more. A bond may be issued at a discount for the following reasons. 30 x 3 points 90 point price increment from the 6 price.

A A discount bond is bought at par. A deep-discount bond that sells at a significant discount from par value. Treasury bills Treasury Bills T-Bills Treasury Bills or T-Bills for short are a short-term financial instrument issued by the US Treasury with maturity periods from a few days up to 52 weeks.

1 I A simple loan requires the borrower to repay the principal at the maturity date along with an interest payment. For multiple-choice and truefalse questions simply press or click on what you think is the correct answer. A I is true II false.

Both bond discount and premium are amortized. Compute the yield to maturity for each bond. 91 Which of the following are true for discount bonds.

The 630 bond is 30 of the way from 6 to 7. Up to 24 cash back Using the 5 discount rate and the same cash ow as above the price of the bond is the sum of the present values of its cash ows. Zero coupon bonds are issued at par value.

The bonds have a coupon rate of 105 pay interest semiannually and have a. The coupon rate is the annual income that is expected by an investor. PV 40 1 005 40 1 0052.

D The bond has no value until the year it matu then. A The bond will be issued at par. Since the discount is so small it can amortize the amount on a straight-line basis and simply debit 20000 to interest expense in each successive year with the following entry.

A bond that is selling at a discount from par value and has a coupon rate significantly less than. Answer Bond discount is amortized but bond premium is not. The following table summarizes prices of various default-free zero-coupon bonds expressed as a percentage of face value.

C The yield to maturity is greater than the coupon rate when the bond price is below the par value. A zero-coupon bond is a great example of deep discount bonds. Which of the following is true of the Discount on Bonds Payable account.

A A discount bond is bought at par. Since the coupon 6 is lower than the market interest 7 the bond will be traded at a discount Bond Will Be Traded At A Discount A discount bond is one that is issued for less than its face value. A zero-coupon bond is a bond that pays no interest and trades at a discount to its face value.

A When the coupon bond is priced at its face value the yield to maturity equals the coupon rate. There are two ways for ABC to amortize the discount. C The bond has a zero par value.

A A discount bond is bought at par. 3 Which of the following are true for a coupon bond. Why a Bond Sells at a Discount.

B I is false II true. If you have difficulty answering the following questions learn more about this topic by reading our Bonds Payable Explanation. The bonds are due inten yearsA It is subtracted from the Bonds Payable balance and shown with long-term liabilities on thebalance sheetB It is added to the Bonds Payable balance and shown with long-term liabilities on thebalance sheetC It is subtracted from the Bonds Payable.

Discount on bonds payable.

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