Explain why the yield of a bond that trades at a discount exceeds the? bond's coupon rate.

Fantastic news! We've Found the answer you've been seeking!

Question:

Explain why the yield of a bond that trades at a discount exceeds the? bond's coupon rate. ?(Select the best choice? below.)

A. The bond can be purchased for a discount, which gives it an "extra return" hence, the yield exceeds the coupon.

B. The bond's coupon yield is irrelevant. It trades at a discount because investors avoid these bonds.

C. Because the value of the bond is discounted, the return on the bond is reduced and the yield exceeds the coupon.

D. The bond is trading at a discount because investors don't like the bond

Related Book For answer-question

Corporate Finance

ISBN: 978-0134083278

4th edition

Authors: Jonathan Berk, Peter DeMarzo

See More Books

Posted Date: Jan 31, 2024 03:45 AM

See More Questions

Explain why the yield of a bond that trades at a discount exceeds the bond's coupon rate?
Congrats! You got a job as a CFO in UK. You are asked to recommend how a company can eliminate the risk of holding a foreign bond using the information provided below In all the excitement about last...
Instructions: Enter all answers directly in this worksheet. When finished select Save As, and save this document using your last name and student ID as the file name. Upload the data sheet to...
Write a reflective paper about Disability Network West Michigan
Let f, g: R R, where g(x) = 1 - x + x2 and f(x) = ax + b. If (g o f)(x) = 9x2 - 9x + 3, determine a, b.
(a) Efficient market hypothesis (EMH) states that the price of a security (such as a share) accurately reflects the information available. When information arrives, how fast will an information about...
The systems flowchart presented in Figure 11-12 and the following description summarize ConSport Corporations cash disbursements system: a. The accounts payable department approves all invoices for...
In recent years more people have been working past the age of 65. In 2005, 27% of people aged 6569 worked. A recent report from the Organization for Economic Cooperation and Development (OECD)...
A histogram was created on one of the variables from a fictional Math Anxiety dataset, discuss the distribution of the data.Do they reflect a normal distribution if so why or why not? 51 Age 54 55 23...
While pulling out of her driveway, Bethany becomes distracted by a bee and strikes Melanie, who is riding past on a bicycle. Bethany suffers serious injury as a result of the accident while Melanie...
Write a new Matlab code (Code 6) for the following form of the one-dimensional linear steady-state advection-diffusion equation: U-D=s(x), where s(x) is a known source. dx dx' using the method of...
E. (Simple Interest) A bank is offering 3.5% simple interest on a savings account. If you deposit Php7,500, how much interest will you earn in two years? 1 = prt
Since the Drug-Free Workplace Act of 1988 many U.S. employers have chosen to conduct drug testing as a pre-employment requirement, random testing of current employees, or a required test after a...
A gear pump has a 80 mm outside diameter, a 55 mm diameter, and a 25 mm width. If the actual pump flow rate at 2300 rpm and rated pressure is 140 LPM, calculate the Volumetric efficiency.
McGarr owned a property called Belgrave Square. McGarr sold Belgrave Square to Ward by a general warranty deed. Ward recorded his deed. The following year, on February 1, Ward sold Belgrave Square to...
Miller Companys contribution format income statement for the most recent month is shown below: Total Per Unit Sales (43,000 units) $ 344,000 $ 8.00 Variable expenses 215,000 5.00 Contribution margin...
Write a program that will compute the area of a triangle. The program will read the base and height values and display the area. The following is an example of running the program. The example...
Suppose that the electrical potential at the point (x, y, z) is E(x, y, z) = x + y - 2z. What is the direction of the acceleration at the point (1,3,2)?
Allison and Bill are both mutual fund managers, although Allison is more skilled than Bill. Both have $100 million in assets under management and charge a fee of 1%/year. Allison is able to generate...
No-Growth Corporation currently pays a dividend of $2 per year, and it will continue to pay this dividend forever. What is the price per share if its equity cost of capital is 15% per year?
Find online the annual 10-K report for Costco Wholesale Corporation (COST) for fiscal year 2015 (filed in October 2015). a. Which auditing firm certified these financial statements? b. Which officers...
Change the type and value of variables in the nutri data set according to Table 1.2 and save the data as a CSV file. The modified data should have eight categorical features, three floats, and two...
Visit the UCI Repository https://archive.ics.uci.edu/. Read the description of the data and download the Mushroom data set agaricuslepiota. data. Using pandas, read the data into a DataFrame called...
It frequently happens that a table with data needs to be restructured before the data can be analyzed using standard statistical software. As an example, consider the test scores in Table 1. 3 of 5...

Explain why the yield of a bond that trades at a discount exceeds the? bond's coupon rate.

Question:

Expert Answer:

The detailed answer for the above question is provided below The right answer is A The bond can be purchased for a discount which gives it an extra re... View the full answer

Corporate Finance

Students also viewed these finance questions