Question
OwletteIncorporated bonds have a stated coupon rate of 9% and pay interest on an annual basis. They mature in 15 years and have a par
OwletteIncorporated bonds have a stated coupon rate of 9% and pay interest on an annual basis. They mature in 15 years and have a par value of $1,000.The market rate of interest on similar debtis 10%.The value of Owlettebonds is (round to the nearest dollar).
Reinvestment rate risk is the risk that which of the following will occur?
A. interest rates will fall and future cash flows will be reinvested at a lower rate
B. future cash flows will rise making reinvesting interest more difficult
C. default will prevent the bondholder from collecting future cashflows
D. interest rates fluctuate causing the price of the bond to change over time
Gecko Incorporated bonds have a stated coupon rate of 7% and pay interest on ansemi-annualbasis. They mature in 14 years and have a par value of $1,000.The market rate of interest is 14%.What is the value of Gecko bonds?(round to the nearest dollar).
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