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Business, 23.04.2020 07:00 TerronRice

(Finance) True or False:

The risks of holding corporate bonds are of price, re-investment, default, and liquidity. The longer the maturity, the higher the re-investment risk and the lower the price risk.

A corporate bond issue of Aspire Inc. has a 3-year maturity with a 10% semiannual coupon on a $1,000 par value, and trades at a 10% YTMnow. The bond should trade at $1,000.

Acknowledge Inc.’s 15-year bond with a 10% coupon rate (annual payment) has 3 years until maturity and trades at a 13% YTM. This bond should trade at premium against its face value.

SBU Bank is on a sales campaign for an attractive bond issue: It pays 10% coupons annually on a $1,000 face value with a 3-year to maturity. On today’s Wall Street Journal, if you find that the bond’s last price is quoted at $930 with a reasonable required return at 12%, you should probably wait more to purchase the bond.

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(Finance) True or False:

The risks of holding corporate bonds are of price, re-investmen...
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