Bond concept and calculation problems

Jun 17th, 2015
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The floating rate note pays a coupon that adjusts to market levels. Therefore, it will not experience dramatic price changes as market yields fluctuate. The fixed rate note will therefore have a greater price range.

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Bond concept and calculation problemsa. The floating rate note pays a coupon that adjusts to market levels. Therefore, it will not experience dramatic price changes as market yields fluctuate. The fixed rate note will therefore have a greater price range.b. Floating rate notes may not sell at par for any of the several reasons:1. The yield spread between one-year Treasury bills and other money market instruments of comparable maturity could be wider or narrow than when the bond was issued.2. The credit standing of the firm may have eroded or improved relative to Treasury securities, w

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