You Are Considering 2 Bonds That Will Be Issued Tomorrow

question 33

True/False

You are considering 2 bonds that will be issued tomorrow.Both are rated triple B (BBB, the lowest investment-grade rating), both mature in 20 years, both have a 10% coupon, neither can be called except for sinking fund purposes, and both are offered to you at their $1,000 par values.However, Bond SF has a sinking fund while Bond NSF does not.Under the sinking fund, the company must call and pay off 5% of the bonds at par each year.The yield curve at the time is upward sloping.The bond's prices, being equal, are probably not in equilibrium, as Bond SF, which has the sinking fund, would generally be expected to have a higher yield than Bond NSF.

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Reliability

How much a testing tool generates consistent and stable outputs over various times.

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The degree to which a measurement or estimation matches the true value or standard.

Reliability

The degree to which an assessment tool produces stable and consistent results over multiple measurements.