Business, 23.03.2020 18:50 sayedabdullah

You hold a 10-year, zero coupon, bond and a 10-year bond that has a 6% annual coupon. The same market rate, 6%, applies to both bonds. If the market rate rises from the current level, the zero coupon bond will experience the larger percentage decline.

True or False

Answers: 2

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Answers

Answer from: Arealbot

Answer

TRUE

Explanation

By definition a zero-coupon bond does not make any coupon payments and therefore is sold at a deep discount from the face value. If market rate rises, by definition, the zero-coupon bond would experience a larger percentage decline. The 6% coupon bond would also experience a decline but the coupon payments of the bond would be the reason why this bond would experience smaller percentage decline relatively to the zero coupon bond.

Answer from: LilDicky

true

Explanation:

In this case, the reinvestment risk favors the bond with the annual coupon, since the proceeds from the coupon can be invested at a higher interest rate. The farther away the proceeds from a bond, the more it will be affected by a change in the market interest rate, that is why it carries a higher interest risk.

Answer from: Quest

1 all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

Answer from: Quest

fractionally backed paper money

fiat money

paper money

metallic money

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You hold a 10-year, zero coupon, bond and a 10-year bond that has a 6% annual coupon. The same marke...

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