Why buy bonds at premium
[DOC File]Bond Yields and Prices
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Bonds sold at premium must decrease in value to Par. ... long-maturity bonds. If rates are expected to increase, buy large coupons and short maturities. Can’t control interest rates but can control the coupon and maturity of the portfolio. Maturity is a poor measurement for a bond’s price change.
[DOC File]Quantitative Problems Chapter 10
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Are these two bonds selling at a discount, premium, or par? (c) If the required return on the two bonds rose to 10%, what would the bonds’ prices be? Problem solution for end of chapter and study guide. 1. $924.18. 2. $148.64. 3. (a) Bond A $1,172.92. Bond B $802.07 (b) Bond A is selling at a premium. Bond B is selling at a discount
[DOC File]CHAPTER 18
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a. Why do companies buy trading securities? Record the purchase of the bonds on December 31, 2001. For trading securities, the premium or discount is not amortized. Record the adjusting entry to record interest for the month of January 2002. The bonds are selling for $11,000 at January 31, 2002. Record any necessary adjusting entry related to ...
Chapter 9
buy only high-quality bonds. attempt to avoid default risk. attempt to avoid call and convertible risk. attempt to avoid reinvestment and price risk. (d , moderate) 28. James wants to invest in bonds and has a 10 year investment horizon. To immunize his portfolio, he must buy bonds with durations of ----- …
[DOC File]FIXED INCOME SECURITIES
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Result. The yield on all premium bonds in this case will be 14.29%. All premium bonds have the same tax treatment: all income is taxed in the year it occurs. This result would not hold if the ordinary income and capital gains rates were different. Zero Coupon Bond. You would need to write a computer program to solve for the amortization schedule.
Chapter 7
U.S. Savings Bonds compare favorably with corporate bonds because any . interest related to the . original issue discount on savings bonds is . deferred until the. savings bonds are cashed in. In comparison, any original issue discount on corporate bonds must be amortized and included in . the . investor’s annual tax returns.
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