A bond investor is analyzing the following annual coupon bonds: Issuing...
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Finance
A bond investor is analyzing the following annual coupon bonds:
Issuing Company
Annual Coupon Rate
Irwin, LLC
6%
Johnson Corporation
12%
Smith Incorporated
9%
Each bond has 10 years until maturity and the same level of risk. Their yield to maturity (YTM) is 9%. Interest rates are assumed to remain constant over the next 10 years.
Using the previous information, correctly match each curve on the graph to its corresponding issuing company. (Hint: Each curve indicates the path that each bonds price, or value, is expected to follow.)
Curve A
Curve B
Curve C
jOHNSON CORPORATION
SMITH INCORPORATED
IRWIN LLC.
Based on the preceding information, which of the following statements are true? Check all that apply.
Irwin, LLCs bonds have the highest expected total return.
The bonds have the same expected total return.
The expected capital gains yield for Johnson Corporations bonds is negative.
The expected capital gains yield for Johnson Corporations bonds is greater than 12%.
Smith Incorporateds bonds have exhibited a substantial trading volume in the past few years. Its bonds would be referred to as a .
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