You predict that interest rates are about to fall. Which bond will give you the highest capital

Question:

You predict that interest rates are about to fall. Which bond will give you the highest capital gain?
a. Low coupon, long maturity.
b. High coupon, short maturity.
c. High coupon, long maturity.
d. Zero coupon, long maturity.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Investments

ISBN: 9780073530703

9th Edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

See More Books

Question Posted: Jan 04, 2013 07:57 AM

See More Questions

A bank manager is quite certain that interest rates are going to fall within the next six months. How should the bank manager adjust the banks six-month repricing gap and spread to take advantage of...
1. Povero believes that interest rates are a major factor in the real estate market. What are the implications of rising, falling, and steady interest rates for future real estate prices? 2. If the...
An investor who notices that interest rates are much lower in Japan than in the United States borrows in Japan and invests the proceeds in the United States. This is called uncovered interest...
Alton division (A) and Birmingham division (B) are two manufacturing divisions of Conglom plc. Both of these divisions make a single standardized product; A makes product I and B makes product J....
Shown at right are a constant function and two cycles of a cosine graph over the domain 0 x 720. The first intersection point is shown. What are the next three intersection values?
Yourecentlypurchasedastockthatisexpectedtoearn22percentinaboomingeconomy,9percentinanormaleconomy,andlose33percentinarecessionaryeconomy.Thereisa5percentprobabilityofaboomanda75percentchanceofanormale...
Business purchase decision. A study in the Journal of Business and Industrial Marketing (Vol. 35, 2020) developed and tested a theoretical framework to examine the congruency on the roles of values...
Tell whether each of the following transactions related to an office building is a revenue expenditure (RE) or a capital expenditure (CE). In addition, indicate whether each transaction is an...
Required: 1 . Calculate ending inventory using the lower of cost and net realizable value rule. 2 . Based on your analysis, prepare the journal entry needed to adjust inventory.
1. If Bozena participates and the 401(k) earns 10 percent annually, how much will she have accumulated in 45 years (to age 67) even if her salary does not change? 2. If she does not participate and...
The historical yield spread between AAA bonds and Treasury bonds widened dramatically in 2008. If you believe the spread will soon return to more typical historical levels, what should you do? This...
Rank the durations or effective durations of the following pairs of bonds: a. Bond A is an 8% coupon bond, with a 20-year time to maturity selling at par value. Bond B is an 8% coupon bond, with a...
The most commonly preferred conflict resolution mode for project managers is: A. Compromise B. Confrontation C. Smoothing D. Withdrawal
Use least square regression to fit a straight line to the following data taken from the conductance (S/m) of a material with respect to temperature (C) of a composite material used to absorb heat....
A pile group consists of nine friction piles in clay soil (see Figure 10-40). The diameter of each pile is 16 in., and the embedded length is 30 ft each. Center-to-center pile spacing is 4 ft. Soil...
The rigid bar EBC is supported by two links AB and CD as shown in Figure 1. The Link AB is made of aluminum (E = 70 GPa) and the link CD is made of steel (E = 200 GPa). Both links have a Width = 30...
a well-insulated storage tank was pressurized under ideal gas conditions by air flowing into the tank. We used the first law to estimate the final temperature of the gas in the tank, Tf,tank- = We...
Transportation of natural gas is commonly done via pipelinesacross long distances. A company uses a 0.6-m diameter pipe totransport natural gas. Then pumping stations are located atdifferent points...
Kwan Corp. started operations on January 1, 2011. It is now December 31, 2011: the end of the fiscal year. The part-time bookkeeper needs your help to analyze the following three transactions: a. On...
Find the radius of convergence of? 1.2.3 1.3.5 (2n-1) r2n+1 -1
Describe the impact that one countrys environmental policies could have on another countrys trade.
If an investor buys shares in a no-load mutual fund for $31.40 and the shares appreciate to $44.60 in a year, what would be the percentage return on the investment? If the fund charges an exit fee of...
An investor buys shares in a mutual fund for $20 per share. At the end of the year the fund distributes a dividend of $0.58, and after the distribution the net asset value of a share is $23.41. What...
Consider the following four investments. a) You invest $3,000 annually in a mutual fund that earns 10 percent annually, and you reinvest all distributions. How much will you have in the account at...
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company...
Difference between Operating Leverage and Financial Leverage
bpmn diagram for misc purchases

You predict that interest rates are about to fall. Which bond will give you the highest capital

Question:

Step by Step Answer:

D Zero coupon long maturity Explanation When the interest rates are about ...View the full answer

Investments

Students also viewed these Accounting questions