About the interest rate risk of longer-term bonds

Assignment Help Financial Management

Reference no: EM131529320

Both Bond Bill and Bond Ted have 6.2 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 25 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Bill? Of Bond Ted? Both bonds have a par value of $1,000. If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Bill be then? Of Bond Ted? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer-term bonds?

Reference no: EM131529320

Questions Cloud

Week is centered on the idea of strategic planning : The other discussion question for this week is centered on the idea of strategic planning.

Determine the fundamental business advantages : Determine the fundamental business advantages and disadvantages of e-business and e-commerce across the business organization

Weighted average of the costs of debt and preferred stock : The WACC is a weighted average of the costs of debt, preferred stock, and common equity.

How did you interpret and react to the interaction : How did you interpret and react to this interaction? What was the outcome of the situation? Were your goals and their goals met?

About the interest rate risk of longer-term bonds : What does this problem tell you about the interest rate risk of longer-term bonds?

What are the risks and rewards associated with each : Evaluate Beaton’s alternatives. What are the risks and rewards associated with each? Which do you recommend and why?

How you would apply the information in your field : Discuss five tips that you found to be most valuable or interesting from article. Explain how you would apply this information in your field or future career.

Identify and analyze the major driving forces for change : Identify and analyze the major driving forces for change in the external environment of the motorcycle industry

Explain why the speech is either informative or persuasive : Explain why the speech is either informative or persuasive. What's the main difference between an informative and persuasive speech?

User Account

All Pages