标题: Reading 62: Risks Associated with Investing in Bonds-LOS b 习 [打印本页]
作者: 1215 时间: 2011-3-30 13:56 标题: [2011]Session15-Reading 62: Risks Associated with Investing in Bonds-LOS b 习
Session 15: Fixed Income: Basic Concepts
Reading 62: Risks Associated with Investing in Bonds
LOS b: Identify the relations among a bond's coupon rate, the yield required by the market, and the bond's price relative to par value (i.e., discount, premium, or equal to par).
Given that the coupon rate of a bond is higher than the market interest rate on bonds with similar maturities and payment structures, the bond will be trading:
If the bond provides investors with a higher coupon rate than the market interest rate the bond has to be trading at a premium relative to its par value otherwise there is an arbitrage opportunity.
作者: 1215 时间: 2011-3-30 13:56
If the market rate of interest is greater than the coupon rate, the bond will be valued:
If the Coupon Rate > market yield, then bond will sell at a premium.
If the Coupon Rate < market yield, then bond will sell at a discount.
If the Coupon Rate = market yield, then bond will sell at par.
作者: 1215 时间: 2011-3-30 13:56
Gabrielle Daniels and Edin Roth, CFA candidates, are discussing the relationship between a bond’s coupon rate and the required market yield. Looking through the local newspaper, they see a new-issue, 10-year, $1,000 face value 8% semi-annual coupon bond priced at $950. Daniels makes the following statements. Which statement does Roth tell her is correct?
|
A) |
The bond is selling at a premium. | |
|
B) |
The bond is selling at a discount. | |
|
C) |
The current market required rate is less than the coupon rate. | |
When the issue price is less than par, the bond is selling at a discount.
We also know that the current market required rate is greater than the coupon rate because the bond is selling at a discount.
作者: 1215 时间: 2011-3-30 13:56
Kirsten Thompson, CFA candidate, is studying the relationships between a bond’s coupon rate and the required market yield. One study question concerns a new-issue, 15-year, $1,000 face value 6.75% semi-annual coupon bond priced at $1,075. Which of the following choices describes the bond and the relationship of the bond’s market yield to the coupon?
|
A) |
Premium bond, required market yield is less than 6.75%. | |
|
B) |
Discount bond, required market yield is greater than 6.75%. | |
|
C) |
Premium bond, required market yield is greater than 6.75%. | |
When the issue price is greater than par, the bond is selling at a premium. We also know that the current market required rate is less than the coupon rate of 6.75%, because the bond is selling at a premium.
For the examination, remember the following relationships:
| Type of Bond |
Market Yield to Coupon |
Price to Par |
| Premium |
Market Yield < Coupon |
Price> Par |
| Par |
Market Yield = Coupon |
Price = Par |
| Discount |
Market Yield> Coupon |
Price < Par |
作者: 1215 时间: 2011-3-30 13:57
Jonathon Silver, CFA, has a client, Alyce Grossberg, whose only current investment requirement is that she wants to buy a premium bond. The required market yield is currently 7.25% at all maturities. Which of the following $1,000 face value bonds should Silver select for Grossberg’s portfolio?
|
A) |
15-year, zero-coupon bond priced to yield 9.00%. | |
|
B) |
10-year, 7.00% semi-annual coupon bond. | |
|
C) |
10-year, 8.00% semi-annual coupon bond. | |
A bond sells at a premium when the coupon rate is greater than the required market yield. Here, the 10-year, 8.00% semi-annual coupon bond would sell above par, or at a premium.
The 15-year, zero-coupon bond priced to yield 9.00% would sell at a discount. Zero-coupon bonds sell at a discount from par, because they pay no coupon. (Coupon rate = 0.00%.) The 10-year, 7.00% semi-annual coupon bond would also sell at a discount, because the coupon rate is less than the required market yield. Note: The information that this is an annual coupon bond is not relevant for this question.
For the examination, remember the following relationships:
| Type of Bond |
Market Yield to Coupon |
Price to Par |
| Premium |
Market Yield < Coupon |
Price> Par |
| Par |
Market Yield = Coupon |
Price = Par |
| Discount |
Market Yield> Coupon |
Price < Par |
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