About the interest rate risk

Assignment Help Financial Management
Reference no: EM131859826

Interest Rate Risk. Bond J is a 5% coupon bond. Bond K is an 10% coupon bond. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 5%.

If interest rates suddenly rise by 4% (YTM is now 9%), the percentage price change of bond J is______%.

If interest rates suddenly rise by 4% (YTM is now 9%), the percentage price change of bond K is______%.

If interest rates suddenly fall by 4% (YTM is now 1%), the percentage price change of bond J is______%.

If interest rates suddenly fall by 4% (YTM is now 1%), the percentage price change of bond K is______%.

Reference no: EM131859826

Questions Cloud

What is the yield to call and yield to maturity : What is the yield to call and yield to maturity in the 2 cases? Why is dividends per annum valuable information?
Calculate the difference in the total inventory cost : Calculate the difference in the total inventory cost (per period) if the firm moves from an order quantity of 4,000 books to the economic order quantity.
Financial institutions play in our economic system : What are the functions please name AT LEAST four specific functions financial institutions play in our economic system?
Expected future earnings method of company valuation : Discuss the market capitalization, bond value and Expected future earnings method of company valuation.
About the interest rate risk : Interest Rate Risk. Bond K is an 10% coupon bond. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 5%.
Compute the ytm and the ytc : If the firm has the right to call it back after 6 years at par plus half a year’s coupon. Compute the YTM and the YTC.
Mature manufacturing firm : Antiques R Us is a mature manufacturing firm. If you require a return of 14 percent on this stock, what will you pay for a share today?
Bond is premium bond making annual payments : Bond Price Movements. Bond X is a premium bond making annual payments. Bond Y is a discount bond making annual payments.
Average beta of the new stocks added to portfolio : What should be the average beta of the new stocks added to the portfolio?

Reviews

Write a Review

Financial Management Questions & Answers

  Tructure of the investment policy statement ips

Select the most accurate description of the purpose and structure of the Investment Policy Statement ‘IPS’

  What is the market rate of return on stock

The common stock of Eddie's Engines, Inc. sells for $38.03 a share. The stock is expected to pay $4.00 per share next year. Eddie's has established a pattern of increasing their dividends by 6.1 percent annually and expects to continue doing so. What..

  Directly increase cash shown on firms balance sheet

Which of the following actions are most likely to directly increase cash as shown on a a firm's balance sheet?

  About the trade discounts

Bernie’s Bike Shop receives the following trade discounts: 35/25/15. The vendor’s price list indicates that 35 percent off list price is for purchasing bikes in quantities of 100 or more, 25 percent off list price is for assembling the bikes for cust..

  Considering investing in project with characterisitics

You’re considering investing in a project with the following characteristics: Compute the NPV of the project if the tax rate is 0% per year. Is the IRR in this case higher or lower than 20%?

  What is the yield to maturity of the bond

A bond sells for $985.45 and has a coupon rate of 6.50 percent. If the bond has 31 years until maturity, what is the yield to maturity of the bond?

  A fast-growing firm recently paid a dividend

A fast-growing firm recently paid a dividend of $0.70 per share. The dividend is expected to increase at a 10 percent rate for the next three years. Afterwards, a more stable 5 percent growth rate can be assumed. If a 6 percent discount rate is appro..

  Based on the binominal model-what is the option value

The current price of a stock is $20, and at the end of one year its price will be either $25 or $17. The annual risk-free rate is 8.0%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based ..

  Calculate the tax-equivalent yield for this investment

Assume you are in the 15 percent tax bracket and purchase a 6.8 percent, tax-exempt municipal bond. Calculate the tax-equivalent yield for this investment.

  A few years ago Spider Web Inc issued bonds

A few years ago Spider Web Inc issued bonds with a... Bookmark A few years ago Spider Web Inc issued bonds with a 12.40 percent annual coupon rate, paid semiann

  What the investigate business and marketing problem

What the investigate a business/marketing problem,

  Federal reserve changed the reserve requirement

What would the effect be if the Federal Reserve changed the Reserve Requirement to 9%?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd