QUESTION 8 In the present value bond valuation model, risk is generally incorporated into the O timing of cash flows (assuming more risky cash flows are received early). O discount rate or required return. O cash flows (making some smaller if they are more risky). O maturity amount.
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- which one is correct please confirm? QUESTION 27 The term structure of interest rates is related to the ____ risk premium. a. seniority b. marketability c. default d. maturity2. Bond valuation The proces value of the cash flows that the security will generate in the future s of bond valuation is based on the fundamental concept that the current price of a security can be determined by calculating the present There is a consistent and predictable relationship between a bond's coupon rate, its par value, a bondholder's required return, and the bond's resulting intrinsic value. value and its par value. These result from the relationship between a bond's coupon rate and a bondholder's required rate of return Trading at a discount, trading at a premium, and trading at par refer to particular relationships between a bond's intrinsic pay, and a bondholder's required return Remember, a bond's coupon rate partially determines the interest-based return that a bond reflects the return that a bondholder to receive from a given investment. The mathematics of bond valuation imply a predictable relationship between the bond's coupon rate, the bondholder's required return,…In an interest rate swap borrower pays O a. Premium O b. Coupon cashflows O c. Repayment cashflows Od. Discount to cashflows
- he interest rate used to calculate the present value of a bond's cash flows is often referred to as the:Group of answer choices dividend rate. discount rate. multiplier. yield to maturityChanges in yield-to-maturity (YTM) produce market price risk and reinvestment risk. A __________ in yield-to-maturity (YTM) increases a bond’s price and __________ its reinvestment risk. A. decrease / decrease B. decrease / increase C. increase / increase D. increase / decrease1. A bond call price amount is a. lower than the par value b. higher than the par value c. lower than the discount value 2. Risk of losing a market due to forex change. a. economic risk b. market risk c. transaction risk
- With regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity attempts to capture the sensitivity of a bond’s duration to changes in interest rates. D. Both B & C B. Duration is related to yield approximation and convexity is related to price. A. Convexity is related to yield approximation and duration is related to price4. Bond valuation The process of bond valuation is based on the fundamental concept that the current price of a security can be determined by calculating the present value of the cash flows that the security will generate in the future. There is a consistent and predictable relationship between a bond’s coupon rate, its par value, a bondholder’s required return, and the bond’s resulting intrinsic value. Trading at a discount, trading at a premium, and trading at par refer to particular relationships between a bond’s intrinsic value and its par value. This also results from the relationship between a bond’s coupon rate and a bondholder’s required rate of return. Remember, a bond’s coupon rate partially determines the interest-based return that a bondwill pay, and a bondholder’s required return reflects the return that a bondholderis obligated to receive from a given investment. The mathematics of bond valuation imply a predictable relationship between the bond’s…4. Bond valuation The process of bond valuation is based on the fundamental concept that the current price of a security can be determined by calculating the present value of the cash flows that the security will generate in the future. There is a consistent and predictable relationship between a bond's coupon rate, its par value, a bondholder's required return, and the bond's resulting intrinsic value. Trading at a discount, trading at a premium, and trading at par refer to particular relationships between a bond's intrinsic value and its par value. This also results from the relationship between a bond's coupon rate and a bondholder's required rate of return. Remember, a bond's coupon rate partially determines the interest-based return that a bond i reflects the return that a bondholder to receive from a given investment. pay, and a bondholder's required return The mathematics of bond valuation imply a predictable relationship between the bond's coupon rate, the bondholder's required…
- FINANCIAL RISK MANAGEMENT 1. Duration is a measure of interest rates risk. (True/ False) 2. Bond price and interest rates are inverserly related. (True/ False) 3. Lower duration means higher interest rates risk ( inverse relationship) (True/ False)Question 1: a. The risk structure of interest rates and the term structure of interest rates are identical. True or False? Explain. b. The yield curve is a forecasting tool for inflation, the business cycle, and monetary policy. True or False? Explain.The following figures illustrate which theory concerning interest rates? Yield to Maturity Time to Maturity Multiple Choice Yield to Maturity O liquidity premium theory O expectations hypotnesis Time to Maturity O term structure of interest rates risk structure of Interest rates Yield to Maturity Time to Maturity