If a callable bond is trading at a premium, what yield measure is most appropriate? O a) dividend yield b) yield to maturity c) yield to infinity d) yield to call e) none of the above
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- Describe the differences between the yield to maturity (YTM) and the yield to call (YTC) on a bond. Why would the return to the investor be different if a bond is called? Justify your answerExplain the differences between a bond's yield to maturity (YTM) and its yield to call (YTC). Is there a reason why the return to the investor would alter if a bond is called? Please provide justification for your response.What is the relationship between the yield to maturity and the price of a bond? They are negatively related They are positively related There is no relation O The relation is indeterminant
- Which of the following is NOT a defining quality of a standard bond cash flow? a) Coupon b) Maturity c) Perpetuity Cash Flow d) Face Value1. Under what conditions would the yield-to-maturity and current yield of a bond be equal? Group of answer choices a. The bond is priced at par b. The bond is priced at a discount c. Insufficient information d. The bond is priced at a premium 2. Which of the following is correct about the risk-free rate as used in valuing equity instruments? Group of answer choices a. The risk-free rate accounts for the rate of return or yield of a government instrument which does not carry any risk. b. The risk-free rate used for valuing equity instruments is normally the yield of a long-term government security. c. The risk-free rate used for valuing equity instruments is the same as that used for valuing short-term debt instruments. d. The risk-free rate accounts for the risks related to government securities which is composed of credit-spread, maturity risk premium and the real risk-free rate. 3. Berg Inc. has just paid a dividend of P2.00. Its stock is now selling…Discuss the problems with the traditional bond pricing approach by using the yield to maturity?
- Which theory of the term structure proposes that bonds of different maturities are not substitutes for one another? a. Market segmentation theory b. Expectations theory c. Separable markets theory O d. Liquidity premium theoryThe yield to maturity for a bond is equivalent to the market's required return on the bond and is based on risk but the required return on a share of stock ks not based on risk True FalseTrue or False? Macaulay duration of measure of the curvature in the relationship between bond prices and bond yields.
- In the context of coupon-paying bonds, which of the following are most likely determined bymarket forces?I. The current yield.II. The yield to maturity.III. The coupon rate. A. I only.B. II only.C. I and II only.D. I and III onlyHow does the price-yield relationship for a callable bond compare to the same relationship for an option-free bond? The price-yield relationship is best described as exhibiting: negative convexity at low yields for the callable bond and positive convexity for the option-free bond the same convexity for both bond types negative convexity for the callable bond and positive convexity for an option- free bondIf a bond's yield to maturity increases, then what happens to current yield? Group of answer choices Not enough information No change Decrease Increase