aouse.lu 1753b6.j8hew.attempt-18content.id-e Question 1 Coupon rates a nd paymen

Question

aouse.lu 1753b6.j8hew.attempt-18content.id-e Question 1 Coupon rates a nd payments are generally fixed throughout the life of a bond regardless of the economic or market conditions. True False Question 2 Junk bonds pay high interest rates and are issued by even the most solid companies. True False s po Question 3 Risk in finance is defined as the variability of return. True False 5 po Question 4 Which of the following statements is/are correct regarding the intrinsic value of a stock? The intrinsic value of a stock is the same for every well-informed investor O The intrinsic value of a stock is based on forecasted cash flows. The intrinsic value of a stock will change based on how long a stock is expected to be held by the investor. a. and b. above are correct. b. and c. above are correct. 5 pois Question 5 The longer the time to maturity, the smaller the maturity risk associated with a bond True False 5 poin Question 6 One reason that investors may assign a different value to a stock is due to differences in the appropriate discount rate to use in solving for present values True False

Explanation / Answer

Ans:

1) True

coupon rate of a bond is the interest rate paid annually which is generally fixed and expressed as a percentage of the bond's face value.

2) False

These bonds are called junk bonds because companies have high risk of defaulting on their obligations as compared to other bonds issued by solid companies with better performance and balance sheet.

3) True

Variability means the change . Hence variability means the risk that the return will change or vary.

4) b and c above are correct

Intrinsic value is the present value of future cash flow.since it is computed by discounting a set of cash flows its value will change based on how long the stock is expected to be held by the investor.

5) false

Maturity risk is the potential for interest rates to change when the interest rate on bonds is fixed and money is locked in bonds.The longer the duration the higher the maturity risk.

6) True

The discounting rate is the expected rate of return which is used to compute the present value.The change in the discounting rate will change the present value.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.