1-Which of the following statements is false?
A)Prices of bonds with lower durations are more sensitive to
interest rate changes.
B)When a bond is trading at a discount, the price increase
between coupons will exceed the drop
C)when a coupon is paid, so the bond's price will rise and
its discount will decline as time passes.
D)Coupon bonds may trade at a discount, at a premium, or at
par.
E)The sensitivity of a bond's price changes in interest rates
is the bond's duration.
2. Which of the following statements is false?
Given the spot interest rates, we can determine the price and
yield of any other default-free bond.
As the coupon increases, earlier cash flows become relatively
less important than later cash flows in the calculation of the
present value.
When the yield curve is flat, all zero-coupon and
coupon-paying bonds will have the same yield, independent of their
maturities and coupon rates.
When U.S. bond traders refer to "the yield curve," they are
often referring to the coupon-paying Treasury yield curve.
3 -Which of the following statements is false?
-We can use the law of one price to compute the price of a
coupon bond from the prices of zero-coupon bonds.
-The plot of the yields of coupon bonds of different
maturities is called the coupon-paying yield curve.
-It is possible to replicate the cash flows of a coupon bond
using zero-coupon bonds.
-
Because the coupon bond
provides cash flows at different points in time, the yield to
maturity of a coupon bond is the simple average of the yields of
the zero-coupon bonds of equal and shorter maturities.
4-The Sisyphean Company has a bond outstanding with a face
value of $1000 that reaches maturity in 15 years. The bond
certificate indicates that the stated coupon rate for this bond is
8% and that the coupon payments are to be made semiannually.
Assuming the appropriate YTM on the Sisyphean bond is 9%,
then this bond will trade at
a premium.
a discount.
par.
None of these












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