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Author Question: Johnson Products issued 1,000 face value 20-year bonds five years ago. These bonds are currently ... (Read 83 times)

plus1

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on: Jul 10, 2018
Johnson Products issued 1,000 face value 20-year bonds five years ago.
 
  These bonds are currently selling for 1,218.47. From this information we can conclude that the Johnson Products bonds have a yield-to-maturity greater than the coupon rate on these bonds.
  Indicate whether the statement is true or false.

Question 2

The coupon payment for an annual-coupon corporate bond is equal to the coupon rate multiplied by the current price of the bond.
 
  Indicate whether the statement is true or false.


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juliaf

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: FALSE
Explanation: Prices and interest rates are inversely related. Therefore, a higher price means the yield-to-maturity is less than the original coupon rate.

Answer to Question 2

Answer: FALSE
Explanation: The coupon payment for an annual-coupon corporate bond is equal to the coupon rate multiplied by the PAR VALUE of the bond.


plus1

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Reply 2 on: Jul 10, 2018
Great answer, keep it coming :)

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Reply 3 on: Yesterday
Gracias!

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