22)

Indicate which 9 of the following 18 statements are false. Assume face values, coupon rates, and YTMs of bonds are positive, and that time-to-maturity is greater than 1 year.

If the price of bond A increased immediately after a change in YTM, then the change in YTM involved an increase in YTM.

If the yield to maturity of bond A declined by 1 percentage point today, then the price of bond A declined immediately after the YTM declined.

If the yield to maturity of bond A increased by 1 percentage point today, then the price of bond A increased immediately after the YTM increased.

The value of bond A is greater than the value of bond B if 1) the information in the table provides information on each bond; 2) both TA and TB are greater than 0, but we do not know if TA is greater than, equal to, or less than TB; and 3) YB > CB > CA > YA > 0.

Bond	Coupon rate	Yield-to-maturity	Time-to-maturity	Face value	Next annual coupon
A	CA	YA	TA	$1,000	In 1 year
B	CB	YB	TB	$1,000	In 1 year

If the price of bond A declined immediately after a change in YTM, then the change in YTM involved a decline in YTM.

All of the following are parts of the bond contract: the coupon rate, face value, frequency of coupon payments, and maturity date.

The value of bond A is greater than the value of bond B if 1) the information in the table provides information on each bond; 2) both TA and TB are greater than 0, but we do not know if TA is greater than, equal to, or less than TB; and 3) YA > CA > CB > YB > 0.

Bond	Coupon rate	Yield-to-maturity	Time-to-maturity	Face value	Next annual coupon
A	CA	YA	TA	$1,000	In 1 year
B	CB	YB	TB	$1,000	In 1 year

Bonds issued by Griffs Grills have a face value of $1,000 and pay annual coupons with the next coupon due in 1 year. If the price of the bond is greater than $1,000, then the bonds coupon rate is less than its yield-to-maturity.

If the yield to maturity of bond A declined by 1 percentage point today, then the price of bond A increased immediately after the YTM declined.

If the price of bond A declined immediately after a change in YTM, then the change in YTM involved an increase in YTM.

The value of bond Z is greater than the value of bond Q if 1) the information in the table provides information on each bond; 2) both TQ and TZ are greater than 0, but we do not know if TQ is greater than, equal to, or less than TZ; and 3) YZ > CZ > CQ > YQ > 0.

Bond	Coupon rate	Yield-to-maturity	Time-to-maturity	Face value	Next annual coupon
Q	CQ	YQ	TQ	$1,000	In 1 year
Z	CZ	YZ	TZ	$1,000	In 1 year

If the yield to maturity of bond A increased by 1 percentage point today, then the price of bond A declined immediately after the YTM increased.

All of the following are parts of the bond contract: the coupon rate, face value, frequency of coupon payments, maturity date, and yield-to-maturity.

Bonds issued by Griffs Grills have a face value of $1,000 and pay annual coupons with the next coupon due in 1 year. If the price of the bond is greater than $1,000, then the bonds coupon rate is greater than its yield-to-maturity.

The value of bond Z is greater than the value of bond Q if 1) the information in the table provides information on each bond; 2) both TQ and TZ are greater than 0, but we do not know if TQ is greater than, equal to, or less than TZ; and 3) YQ > CQ > CZ > YZ > 0.

Bond	Coupon rate	Yield-to-maturity	Time-to-maturity	Face value	Next annual coupon
Q	CQ	YQ	TQ	$1,000	In 1 year
Z	CZ	YZ	TZ	$1,000	In 1 year

If the price of bond A increased immediately after a change in YTM, then the change in YTM involved a decline in YTM.

Bonds issued by Griffs Grills have a face value of $1,000 and pay annual coupons with the next coupon due in 1 year. If the price of the bond is less than $1,000, then the bonds coupon rate is less than its yield-to-maturity.

Bonds issued by Griffs Grills have a face value of $1,000 and pay annual coupons with the next coupon due in 1 year. If the price of the bond is less than $1,000, then the bonds coupon rate is greater than its yield-to-maturity.

Question 23

Today, Orange Valley Industrial bonds were priced at a premium all day and Violet Sky Food bonds were priced at a discount all day. Both bonds have face values of $1,000 and pay their next annual coupons in 1 year. Isaac had $10,000 at the start of the day and Priya had $10,000 at the start of the day. Which one of the following assertions is true?

		Isaac had enough money to buy 10 Orange Valley Industrial bonds today and Priya had enough money to buy 10 Violet Sky Food bonds today
		Isaac did not have enough money to buy 10 Orange Valley Industrial bonds today and Priya did not have enough money to buy 10 Violet Sky Food bonds today
		Isaac did not have enough money to buy 10 Orange Valley Industrial bonds today and Priya had enough money to buy 10 Violet Sky Food bonds today
		Isaac had enough money to buy 10 Orange Valley Industrial bonds today and Priya did not have enough money to buy 10 Violet Sky Food bonds today

Question 24

Bond A and bond B have the same face value of $1,000, pay annual coupons with the next coupon due in 1 year, were issued at the same time, and mature at the same time. Bond A has a yield-to-maturity of 2.29 percent and a coupon rate of 3.55 percent. Bond B has a yield-to-maturity of 8.49 percent and a coupon rate of 6.98 percent. Indicate which of the following statements is true.

		Bond A is riskier than bond B today
		Bond B is riskier than bond A today
		Bond B was riskier than bond A when the bonds were issued
		The value of bond B is greater than the value of bond A
		The value of bond A is greater than the value of bond B
		Bond A was safer than bond B when the bonds were issued
		Bond B was safer than bond A when the bonds were issued
		Bond B is safer than bond A today
		Bond A is safer than bond B today
		Bond A was riskier than bond B when the bonds were issued