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Questions and Answers
Which method is generally used when pricing debt securities?
Which method is generally used when pricing debt securities?
- Future value
- Internal rate of return
- Discounted cash flow
- Present value (correct)
Which two assumptions combine to form the investor's required yield to maturity?
Which two assumptions combine to form the investor's required yield to maturity?
- Discount rate and market price
- Market price and investor's risk tolerance
- Probability of receiving each payment and market price
- Probability of receiving each payment and discount rate (correct)
What does the yield to maturity determine in the debt sector?
What does the yield to maturity determine in the debt sector?
- The probability of receiving each payment
- The investor's risk tolerance
- The price an investor is willing to trade the debt security (correct)
- The present value of future cash flows
What is an alternative way of expressing the market price?
What is an alternative way of expressing the market price?
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What does the valuation discussion in the debt sector focus on?
What does the valuation discussion in the debt sector focus on?
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