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2 years ago

Which of the followin is NOT a reason why the required return on a bond may differ form its par value?

Business

1 answer:

Paladinen [302]2 years ago

5 0

Answer:

C. The required rate of return exceeds the coupon value, so the bonds sells at a premium

Explanation:

The required return on a bond = Yield to maturity (Current Market interest rate) * Bond Par value.

Coupon return = Coupon rate of bond * Par value of bond.

There are two types of returns on bonds-

(1) Required rate of return (Yield to maturity related)

(2) Return from capital gain

If the Yield to maturity (YTM) related return is higher than the coupon return, then return from capital gain will be negative i.e. there will be a capital loss, so the bond will trade below par value (at discount).

If the Yield to maturity (YTM) related return is lower than the coupon return, then return from capital gain will be positive i.e. there will be a capital gain, so the bond will trade above par value (at premium).

Hence, the required return rate (YTM related) and return from capital gain, both cancel out each other in a bond.

So, following the concept only option (c) - the required rate of return exceeds the coupon value, so the bonds sells at a premium is not a reason of why the required return on a bond may differ form its par value.

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Diano4ka-milaya [45]

Annie can be probably exhibiting strongly positive time preferences and prospect theory. Annie is contemplating which shoes she would buy so she has a strongly positive time preferences and a prospect theory because she has a decision and has an alternatives what type of shoes she would buy.

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3 years ago

In a minimum 200 words explain the idea behind the balance of power. How did this concept play itself out in Europe? How was thi

Ket [755]

Answer:

It meant a political situation among the states in which none of them achieved a power superior to the others. It is an idea of the late Middle Ages, applied to major or minor geographic regions that comprise the plurality of sovereign territories. Throughout Europe there is a legitimate feeling, always subject to interpretation, whereby any action required the confirmation of the rest of the States, the most significant case being the invasion of a territory. In this way the doctrine of just war was reached, to the problem of to what extent and to what extent the actual or imminent engraving of a State could mean a warlike justification. Transactions between contestants, neutral or rival, never ended, hence the relevance of diplomacy, as the concepts of balance, neutrality, freedom of Europe or sovereignty are interpreted continuously, while being used in conversations. Some thought of equilibrium as a natural system, because it was a consequence of international relations, and when a great power had too much force it threatened the others, and therefore, had to counteract the disproportion. Others considered it a desired goal for which he had fought.

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Explanation:

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2 years ago

If an issuer sells bonds at a premium: Multiple Choice The carrying value increases from the par value to the issue price over t

AnnyKZ [126]

Answer:

The carrying value decreases from the issue price to the par value over the bond’s term.

Explanation:

The carrying value of a bond is the par value or face value of that bond plus any unamortized premiums or less any unamortized discounts. The net amount between the par value and the premium or discount is called the carrying value because it is reported on the balance sheet. When a bond is issued at a premium, the carrying value is higher than the face value of the bond.

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3 years ago

At December 31, 2012 and 2013, Plank Corp. had outstanding 3,000 shares of $100 par value 8% cumulative preferred stock and 15,0

zalisa [80]

Answer:

Preference shareholders = $36,000

Equity shareholders = $9,000

Explanation:

As provided the outstanding preference dividend at end of 2012 = $12,000

Total cash dividends declared = $45,000 in the year 2013

Regular preference dividends = $100 $\times$ 3,000 $\times$ 8% = $24,000

Thus, when dividends will be paid in 2013 then firstly they will be used for payment to preference shareholders.

Thus, the company shall pay:

$12,000 + $24,000 = $36,000 to preference shareholders.

Further the balance will be paid to equity shareholders.

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solniwko [45]

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2 years ago