The primary difference between Treasury notes and Treasury bonds is: A) default risk B) maturity at issue C) coupon rate D) tax status | Homework.Study.com (2024)

Get access to this video and our entire Q&A library

• The primary difference between Treasury notes and bonds is: A. maturity at issue B. default risk C. coupon rate D. tax status
• One primary difference between corporate and U.S. Treasury bonds is: A) Treasury bonds always pay interest periodically. B) Corporate bonds always pay interest periodically. C) Interest from Treasury bonds is exempt from federal taxation. D) Interest from
• A Treasury bond with the longest maturity (30 years) has an ask price quoted at 97:30. The coupon rate is 3.50 percent, paid semiannually. What is the yield to maturity of this bond?
• A Treasury bond with the longest maturity (30 years) has an ask price quoted at 97:20. The coupon rate is 3.10 per cent, paid semiannually. What is the yield to maturity of this bond?
• A 3-year zero coupon corporate bond is traded at a price of $760. A 3-year zero coupon Treasury bond is traded at $820. Both bonds have face value of $1000. What is the default risk premium for the corporate bond if yields are compounded semi-annually?
• You are trying to price two bonds that have the same maturity and par value but different coupon rates. Both bonds mature in 8 years and at maturity both bonds return the par value of $1,000. One bond has a coupon rate of 3% and a yield to maturity of 3%.
• The coupon rate on an issue of debt is 11%. The yield to maturity on this issue is 12%. The corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds?
• A bond that has features: The coupon rate of 5%. Principal $1,000. Term to maturity 10 years. Requirements: a. What will be the holder receive when the bond matures? b. If the current rate of interest on the comparable debt is 8%, what should be the
• If the 10-year Treasury bond rate is 3.0%, the inflation premium is 1.0% and maturity risk premium on 10-year bond is 0.3%, what is the risk-free rate on the treasury bonds?
• What intrinsic value would you assign to a 30-year corporate bond with a default rating of AA, a coupon rate of 6%, a face value of $1,000? (Hint: Get the YTM first through adding the default risk pre
• After-tax cost of debt - Fitbite, Inc. currently has an outstanding bond that pays interest annually, a coupon rate of 6% and 5 years until Maturity. If it is in the 35 % marginal tax rate, what is it
• Which one of the following bonds would be likely to exhibit a greater degree of interest rate risk? a. A zero-coupon bond with 20 years until maturity b. A coupon-paying bond with 20 years until maturity c. A floating-rate bond with 20 years until matu
• The bonds below have the same maturity. Which bond is the most risky? A. A discount bond. B. A coupon bond with a semi-annual coupon and coupon rate of 5%. C. A coupon bond with an annual coupon and coupon rate of 2%. D. Cannot be determined.
• Does a higher coupon Treasury bond generally have a higher YTM than a similar T-bond with identical term-to-maturity and liquidity risk?
• A U.S. Treasury bond that matures in 10 years has yield of 6%. A 10-year corporate bond has a yield of 8%. Assume the both rate bond is 0.5%. What is the default risk premium on the corporate bond?
• A thirty-year U.S. Treasury bond has a 4.0 percent interest rate. In contrast, a ten-year Treasury bond has an interest rate of 2.5 percent. A maturity risk premium is estimated to be 0.2 percentage p
• The annual coupon rate on a 1-year treasury bond is 5.5%. The coupon on a 2-year treasury bond is 5.8%. What is the implied 1-year forward rate?
• A bond issue sells for $875. The coupon rate is 7%, the bonds mature in 20 years, and interest is paid semi-annually. The tax rate is 35%. What is the aftertax cost of debt?
• Bond A: Par Value $2,000, 1 Year to Maturity, 3% Yield to Maturity, 0% Coupon Rate Bond B: Par Value $2,000, 2 Years to Maturity, 5% Yield to Maturity, 0% Coupon Rate Bond C: Par Value $2,000, 3 Years
• A 10-year Treasury bond has an 8 percent coupon. An 8-year Treasury bond has a 10 percent coupon. Both bonds have the same yield to maturity. If the yields to maturity of both bonds increase by the same amount, which of the following statements is correct
• Two bonds are identical except for their maturity. The bonds have a coupon rate that is greater than their yield to maturity. Which of the following is true when comparing the two bonds? a. The longer maturity bond has a greater premium (is priced farther
• A 10-year Treasury bond has an 8% coupon, and an 8-year Treasury bond has a 10% coupon. Neither is callable, and both have the same yield to maturity. If the yield to maturity of both bonds increases by the same amount, which of the following statements
• A newly issued bond pays its coupons once annually. Its coupon rate is 6.7%, its maturity is 20 years, and its yield to maturity is 7.5%. If you sell the bond after 1 year, what taxes will you owe if the tax rate on interest income is 40% and the tax rate
• A treasury bond that matures in 10 years has a yield of 3.7%. A 10-year corporate bond has a yield of 7% and a default risk premium of 2%. What is the liquidity premium of the corporate bond?
• A treasury bond that matures in 10 years has a yield of 3.3%. A 10-year corporate bond has a yield of 7% and a default risk premium of 2%. What is the liquidity premium of the corporate bond?
• If the following bonds are identical except for coupon, what is the price of bond B? Face value Face Value Bond A Semiannual Coupon $1,000 Years to maturity $50 Price $1,150.00 Bond B Semiannual Coupon $1,000 Years to maturity $40 A) $ 944.58 B) $ 975.31
• Bond J has a coupon rate of 5.1 percent. Bond S has a coupon rate of 15.1 percent. Both bonds have nine years to maturity, make semiannual payments, a par value of $ 1,000, and have a YTM of 11.2 perc
• Bond J has a coupon rate of 5.8 percent. Bond S has a coupon rate of 15.8 percent. Both bonds have eleven years to maturity, make semiannual payments, a par value of $1,000, and have a YTM of 12.6 per
• Bond J has a coupon rate of 5.6 percent. Bond S has a coupon rate of 15.6 percent. Both bonds have nine years to maturity, make semiannual payments, a par value of $1,000, and have a YTM of 12.2 perce
• The after-tax cost of debt is generally A. equal to the coupon rate of the latest bonds issued by a firm. B. less than the yield to maturity of the latest bonds issued by a firm. C. greater than the yield to maturity on the latest bonds issued by a firm
• If a bond is priced at par value, then: A) it must be a zero-coupon bond. B) the bond is quite close to maturity. C) its coupon rate equals its yield to maturity. D) it has a very low level of default risk.
• The real risk- free rate is 2.05%, inflation is expected to be 2.85% this year, and the maturity risk premium for a treasury bond in 0.3%. What is the interest rate on this bond?
• The real risk- free rate is 3.05%, inflation is expected to be 2.85% this year and the maturity risk premium for a treasury bond in 0.3%. What is the interest rate on this bond? A) 6.90 B) 6.20 C)
• Two bonds have 10 years to maturity. Bond A has a coupon rate of 2.45% and a price of 99.805 (% of FV). Bond B has a coupon rate of 5.90% and a price of 105.214 (% of FV). The bonds make semi-annual c
• A firm has an issue of $1000 par value bonds with an 11 percent coupon. The issue pays interest annually and has 14 years remaining to its maturity date. If bonds of the same risk are currently earnin
• The yield to maturity on 1-year zero-coupon bonds is currently 8.5%; the YTM on 2-year zeros is 9.5%. The Treasury plans to issue a 2-year maturity coupon bond, paying coupons once per year with a coupon rate of 12%. The face value of the bond is $100. a.
• The yield to maturity on a bond: a. is fixed in the indenture. b. is lower for higher-risk bonds. c. is the required rate of return on the bond. d. is generally below the coupon interest rate.
• The principal amount of a bond that is repaid at the end of the loan term is called the bond: A. coupon. B. face value. C. maturity. D. yield to maturity. E. coupon rate.
• A coupon bond has a face value of $1500, a coupon rate of 4%, and 2 years to maturity. If the yield to maturity is 6%, what is the price of the bond?
• A coupon bond has a face value of $1000, a coupon rate of 3%, and 2 years to maturity. If the yield to maturity is 5%, what is the price of the bond?
• A 15-year, 10% semiannual coupon bond has a par value of $1,000. The bond has a price of $1,050. What is the bond's nominal yield to maturity?
• Bond P is a premium bond with an 7.8% coupon, a YTM of 6.55%, and 15 years to maturity. Bond D is a discount bond with an 7.8% coupon, a YTM of 9.55%, and also 15 years to maturity. If interest rates
• Bond P is a premium bond with an 9% coupon, a YTM of 7.75% , and 15 years to maturity. Bond D is a discount bond with an 9% coupon, a YTM of 10.75%, and also 15 years to maturity. If interest rates re
• Bond P is a premium bond with an 8.4% coupon, a YTM of 7.15%, and 15 years to maturity. Bond D is a discount bond with an 8.4% coupon, a YTM of 10.15%, and also 15 years to maturity. If interest rates
• The real risk-free rate is 2% and that the maturity risk premium is zero. If a 1-year Treasury bond yield is 5% and a 2 year Treasury bond yields 7%, what is the 1-year interest rate that
• The yield to maturity on 1-year zero-coupon bonds is currently 4%; the YTM on 2-year zeros is 4.5%. The Treasury plans to issue a 2-year maturity coupon bond, paying
• A Treasury note with a maturity of eight years and a coupon interest rate of 4.50% was quoted at a price of 98. What is this T-note's yield to maturity?
• The real risk-free rate is 3.55%. Inflation is expected to be 3 15% this year, and the maturity risk premium is zero. Taking account of the cross-product term, i.e.. not ignoring it. what is the equilibrium rate of return on a 1 -year Treasury bond? a. 5
• Which one of the following bonds is a tax-free bond? a. 6% callable corporate bond. b. 5% state revenue bond with a maturity of 12 years. c. 7% corporate bond with a maturity of 15 years. d. 3.5% treasury bond with a maturity of 20 years.
• A coupon bond has a face value of $1000, a coupon rate of 6%, and 2 years to maturity. If the price of the bond is $1100, then the yield to maturity it __________. A. 10% B. 6% C. less than 6%. D. greater than 6%.
• The Treasury yield curve plots the yields on Treasury notes and bonds relative to the ____ of those securities. a. face value b. par value c. maturity d. coupon rate
• A bond has 21.5 years to maturity. It has a par value of $1,000 with a coupon rate of 3.6%, paid twice annually. The YTM of bonds of similar term and risk is currently 4.20%. What is the value of the bond? a) $1,074.22 b) $916.82 c) $915.59 d) Some ot
• A bond that was first issues exactly two years ago today had an original maturity of 17 years, a coupon rate of 7.5%, and was issued with the promise to return the face value of $1,000 at maturity. No
• A bond has 24 years to maturity. It has a par value of $1,000 with a coupon rate of 5.2%, paid twice annually. If the price of the bond is $1,024.50, what is the YTM of the bond? a) 4.88% b) 5.26% c) 5.02% d) Some other amount
• A two-year zero-coupon Treasury bond with a maturity value of $1,000 has a price of $873.4387. A one-year zero-coupon Treasury bond with a maturity value of $1,000 has a price of $938.9671. If the pure expectations theory is correct, for what price should
• A firm has an issue of $1000 par value bonds with a 11 percent coupon. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of the same risk are currently earning
• A $1,000 par value bond was issued five years ago at a coupon rate of 10 percent. It currently has 20 years remaining to maturity. Interest rates on similar debt obligations are now 12 percent. Use Ap
• The default-free yield curve on zero-coupon U.S. Government Treasury securities is given below. | Maturity (in years) | Rate | 1 | .01 | 2 | .015 | 3 | .02 | 4 | .025 | 5 | .0275 | 6 |
• Bond P is a premium bond with a coupon rate of 8.7%. Bond D is a discount bond with a coupon rate of 4.7%. Both bonds make annual payments, and both have a YTM of 6.7%, a par value of $1,000, and 12 years to maturity. a) What is the current yield for Bon
• The Wall Street Journal reports that the current rate on 10-year Treasury bonds is 2.85% and the rate on 20-year Treasury bonds is 5.10%. Assume that the maturity risk premium is zero. Calculate the expected rate on a 10-year Treasury bond purchased ten y
• If the coupon rate of a coupon bond is lower than its yield to maturity, then the present value of the bond is _______________ than its future value. A. Lower. B. Higher. C. The same. D. Cannot be answered.
• Bonds with a relatively high risk of default are called: A) Brady bonds B) junk bonds C) zero coupon bonds D) investment grade bonds
• I have a bond outstanding with a coupon rate of 3.7% that is paid semiannually and has 16 years to maturity. The yield to maturity on this bond is 3.9 % and the bond has a par value of $5,000. What is the price of the bond?
• $1,000 par value zero-coupon bonds (ignore liquidity premiums). Bond ; Years to Maturity ; Yield to Maturity ; A ; 1 ; 6.00% ; B ; 2 ; 7.50% ; C ; 3 ; 7.99% ; D ; 4 ; 8.49% ; E ; 5 ; 10.70% ; The exp
• 20-year riskless zero-coupon bonds (say, pure discount U.S. Treasury bonds) are currently yielding 9% to maturity and similar five-year bonds are now yielding 10% to maturity. a) What is the implied forward rate on a 15-year bond which will start at the
• One, two and three year maturity, default-free, zero-coupon bonds have yields-to-maturity of 7%, 8% and 9% respectively. What is the implied one-year forward rate, one year from today? A. 2.0% B. 8.0% C. 9.0% D. 11.1%
• One-, two-, and three-year maturity, default-free zero-coupon bonds have yields to maturity of 7%, 8%, and 9%, respectively. What is the implied 1-year forward rate 1 year from today? a. 8,99% b. 9.01% c. 8.03% d. 11.12% e. 2.07%
• The Wall Street Journal reports that the current rate on 5-year Treasury bonds is 2.35% and on 10-year Treasury bonds is 4.35%. Assume that the maturity risk premium is zero. Calculate the expected rate on a 5-year Treasury bond purchased five years from
• What are bond ratings based upon? A. The default risk B. The real interest rate C. The face value D. The coupon rates
• A Treasury bond that matures in 10 years has a yield of 5.25%. A 10 year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.65%. What is the default risk pr
• A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 7%. Assume that the liquidity premium on the corporate bond is 0.55%. What is the default risk pr
• A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 7.25%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk pre
• A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 6.95%. Assume that the liquidity premium on the corporate bond is 0.6%. What is the default risk
• A Treasury bond that matures in 10 years has a yield of 4.25%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.3%. What is the default risk pre
• 4. A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk pre
• A Treasury bond that matures in 10 years has a yield of 4.5%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk pre
• A Treasury bond that matures in 10 years has a yield of 4%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.8%. What is the default risk premiu
• A Treasury bond that matures in 10 years has a yield of 4%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premiu
• A Treasury bond that matures in 10 years has a yield of 5%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.3%. What is the default risk premiu
• A Treasury bond that matures in 10 years has a yield of 4.25%. A 10-year corporate bond has a yield of 7.75%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk
• A Treasury bond that matures in 10 years has a yield of 5.75%. A 10-year corporate bond has a yield of 8.75%. Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk
• A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 8%. Assume that the liquidity premium on the corporate bond is 0 5%. What is the default risk premiu
• A Treasury bond that matures in 10 years has a yield of 4%. A 10-year corporate bond has a yield of 7.75%. Assume that the liquidity premium on the corporate bond is 0.4%. What is the default risk pre
• A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 7.5%. Assume that the liquidity premium on the corporate bond is 0.25%. What is the default risk
• A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield of 10%. Assume that the liquidity premium on the corporate bond is 0.3%. What is the default risk pr
• A Treasury bond that matures in 10 years has a yield of 5.75%. A 10-year corporate bond has a yield of 7.5%. Assume that the liquidity premium on the corporate bond is 0.6%. What is the default risk p
• A treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.5%. What is the default risk premiu
• A Treasury bond that matures in 10 years has a yield of 5%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is 0.4%. What is the default risk premiu
• A Treasury bond that matures in 10 years has a yield of 5%. A 10-year corporate bond has a yield of 7.5%. Assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk pre
• You are considering an investment in 30-year bonds. The 1-year Treasury bill rate is 3.25%. The risk free rate is 2%, the default risk premium is 1.05%, the liquidity risk premium is 0.5% and the matu
• The Treasury yield curve plots the yields on Treasury notes and bonds relative to the ________ of those securities. a. maturity b. market price c. coupon rate d. issue date e. face value
• If the 10 year Treasury bond rate is 5.7%, the inflation premium is 2.9% and the maturity risk premium on 10-year Treasury bond is .5%, assuming that there is no liquidity - risk premium on these bonds, what is the real risk factor?
• Assume that interest rates on 20-year Treasury and corporate bonds are as follows: T-bond = 7.72% A rated bond = 9.64% AAA rated bond = 8.72% BBB rated bond =10.18% The differences in rates among
• A firm has an issue of $1,000 par value bonds with a 7 per cent coupon. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of the same risk are currently earnin
• The interest rate risk of a noncallable bond is most likely to be positively related to the a. Risk-free rate b. Bond's coupon rate c. Bond's time to maturity d. Bond's yield to maturity
• Interest Rate Risk Both Bond Bill and Bond Ted have 6.2% coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 25 years to maturity If
• You buy a very risky bond that promises a 9.5% coupon and a return of the $1,000 principal in 10 years. You pay only $500 for the bond. You receive the coupon payments for three years and the bond defaults. After liquidating the firm, the bondholders rece
• A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.1% is paid semiannually. The bond is currently selling for a price of $1,128 and will mature in 10 years. The firm's tax rate is 34%. The after-tax cost of debt f