User Account

All Pages

Bond prices and interest rate risk

Assignment Help Finance Basics
Reference no: EM133119895

[Bond Prices and Interest Rate Risk]

Consider a bond that has a coupon of 8% paid annually and has a maturity of 5 years. The bond is currently selling for $1,047.34, which means its YTM is 6.85%.

a. Compute its duration.

b. If interest rate (YTM) is expected to increase by T5 basis points, what is the expected dollar change in price? Percentage change in price?

c. Using duration to obtain approximate answers for question (b).

Reference no: EM133119895

Questions Cloud

What must the bank demonstrate to establish negligence : KLC LLP, a firm of CPA's, issued an unqualified audit report for its client, Piper Manufacturing Corporation, a footwear manufacturer in Asia. Piper Manufacturi
Academic center of excellence : How might you use the Academic Center of Excellence to support you this semester? How can the College help you understand better how to access these services?
Determining the federal reserve : Currently a community bank has $45,000 in reserves, demand deposits of $200,000, and loans of $145,000. Shortly, it receives a $50,000 demand deposits and a $25
Le-ond prices and interest hate risk : One year ago, you purchased a 2-year bond with Y'l'M ot 5% and coupon rate of 4% [semiannual payments). Men you are selling it today, you notice that its YTM ha
Bond prices and interest rate risk : Consider a bond that has a coupon of 8% paid annually and has a maturity of 5 years. The bond is currently selling for $1,047.34, which means its YTM is 6.85%.
Calculating the npv and irr on a financial calculator : When calculating the NPV and IRR on a financial calculator (I'm using HP-12C), is the sequence with which you input the payments important?
Coupon rate of the new issue : HYDRO ONE INC wishes to issue a new series of bonds on the market to finance a major expansion project. The maturity would be 20 years and to establish a compet
Evaluation of a capital project : The project is expected to produce sales revenue of $60,000 the first year; this revenue will increase by 5% per year over the next two years.
Most compelling topics : What were the most compelling topics learned in this course? How did participating in discussions help your understanding of the subject matter?

Reviews

Write a Review

Finance Basics Questions & Answers

  What is behind the so-called patent paradox

What is behind the so-called ‘patent paradox'? How can it be explained? Why isn't it optimal in terms of public policy to have patents that last forever? Discuss.

  What will be the principal balance at the end

The interest rate for the first four years of an $98,000 mortgage loan is 9.2% compounded semiannually. Monthly payments

  In what sense is a reinvestment rate assumption embodied

In what sense is a reinvestment rate assumption embodied in the NPV, IRR, and MIRR methods?What is the assumed reinvestment rate of each method?

  Unfair advantage in global markets

The U.S. has long criticized Beijing's policymakers of keeping the Yuan (Chinese currency) artificially cheap to give Chinese exports an unfair advantage in global markets. Explain how China has been able to devalue their currency. The more specif..

  What price should be charged

If the company marks up total cost by 0.51, what price should be charged if 56,000 units are expected to be sold?

  How much is Fethe equity worth

The risk-free rate is 6%, and the standard deviation of returns for companies similar to Fethe is 50%. How much is Fethe equity worth

  How the expenditure on projects a and b would be dealt

Sunny plc acquired a piece of machinery at the beginning of its financial year in January 2015 for Rs 250,000 to be used in the business for 7 years. It is the

  Evaluate capital budgeting projects

What financial tools are used to evaluate capital budgeting projects, such as NPV, IRR, profitability index, ARR, and payback?

  How can performance measurement systems be tested

How can performance measurement systems be tested? Suggest one method.

  How much did you contribute to the account each year

Forty years ago, you had a balance of $10,000 in your retirement account. Today, after making annual contributions for 40 years, you have $1,000,000

  How much will jenny have to invest each month

Jenny is planning to retire at 65 and her goal is to have $750,000 in her 403b when she retires. How much will Jenny have to invest each month if she earns 9%?

  1 describe a real or made up but realistic situation that

1. describe a real or made up but realistic situation that could cause you or someone you know to have to use money

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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