1. A bond’s cost of capital is equal to the YTM of a fully adequate substitute security. 2. The present value of investment ORD is higher 3. As the discount rate or required return rate increases, PV for an ordinary annuity will increase; everything else remains constant. 4. Annual payment will amount to $27,836 5. The price or PV of an existing bond drops when interest rates increase and other factors remain constant. In the opposite situation, the price/ PV of a bond that is subject to declining interest rates increases.
You will have $3,163 when it matures 7A 10-year zero coupon bond 8Ellen would have $322 after 8 years if she leaves it invested at 8 .5% with annual compounding 9The total payments on the loan over its life will exceed $250 ,000 10 As r rises and all else is held constant , the required rate -of-return (ROR )on common stock also rises 11If equilibrium prices decrease 12Investment DUE has a higher present value 13Investment DUE has a higher future value 14The yield curve usually slopes upward 15Roderick would have $746 after 6 years if he leaves it invested at 5 .5 % 16An increase in supply tends to cause long -term interest rates to decline 17It currently trades at par 18A mortgage lender typically earns more income from points than origination fees 19Treasury: 8%, AAA corporate bonds: 8 .2%, BBB corporate bonds: 9 .4 % 20It currently trades at a premium 21An increase in demand for Treasury notes tends to cause short-term interest rates to decline 22The coupon rate will remain fixed until maturity 23 If purchased today , its redemption value in 15 years would be greater than its purchase price 24Both bonds’ values will increase 25Interest expense under GAAP can differ from cash payments due to differences between book and market yields 26Municipal bonds generally do not provide any protection against inflation 27Its current market price must be less than its redemption value 28If there are positive changes in economic prospects 29A 10- year noncallable Bond B 30Higher coupon paying bonds generally provide more safety against default risk