User Account

All Pages

Buying this bond all market interest rates

Assignment Help Finance Basics
Reference no: EM131222521

Please help me solve this. question.

Consider a bond that promises the following cash flows. The yield to maturity is 12%.

Year 0 1 2 3 4

Promised

Payments

160 160 170 180 230

You plan to buy this bond, hold it for 2.5 years, and then sell the bond

a. What total cash will you receive from the bond after the 2.5 years? Assume that the periodic cash flows are reinvested at 12%.

b. If immediately after buying this bond all market interest rates drop to 11% (including your reinvestment rate), what will be the impact on your total cash flow after 2.5 years? How does this compare to part (a)?

c. Assuming all market interest rates are are 12%, what is the duration of this bond?

Reference no: EM131222521

Questions Cloud

Market on a risk-adjusted basis : If the risk-free rate is 5%, calculate and compare the Sharpe Ratio and the Treynor Index for both Your Portfolio and The Market. Did your portfolio beat the market on a risk-adjusted basis?
Develop a public relations strategy could use to combat : Develop a public relations strategy that BPI and other firms that manufacture LFTB could use to combat the bad publicity and efforts to ban the use of the product.
Identifying and dealing with such correlations in cfgs : Similar to correlated branches in CFGs, we also have correlated data selectors in DDGs. How can you detect such correlations in DDGs, and how do you deal with them?
What must be the value of a : If the basic amplifier has a finite open-loop gain, what must be the value of A such that the closed-loop gain is within 0.25 percent of the ideal value.
Buying this bond all market interest rates : If immediately after buying this bond all market interest rates drop to 11% (including your reinvestment rate), what will be the impact on your total cash flow after 2.5 years? How does this compare to part (a)?
What is minimum qualification under property occupations act : CPPDSM4080A Work in the real estate industry. What is the minimum qualification under the Property Occupations Act (POA) for a salesperson and a property manager
Identify some issues raised by the new brand of physician : Given the new role of hospitalists in patient care, identify some issues raised by this new brand of physician for the primary physician and patient.
General price level would be reported : Inflation was 8 percent during the most recent year and your organization's investment in land rose 12 percent. If the beginning appraised land value was $1,000,000, what increase in specific prices over general price level would be reported, stat..
Determine the loop gain t and the closed loop gain : The ideal feedback transfer function is given by Equation. - Assume the feedback transfer function is β = 0.15. Determine the loop gain T and the closed-loop gain Af.

Reviews

Write a Review

Finance Basics Questions & Answers

  How does the current policy compare with the optimal policy

Fullerton Wine Company is a retailer which sells vintage wines. The company has established a policy of reordering inventory every 30 days. A recently employed MBA has considered Fullerton's inventory problem from the EOQ model viewpoint.

  Find the correct cost of capital for evaluating a new

conglomerate company has a cost of capital based on the capm of 17. the risk-free rate is 4 and the market risk premium

  A stock has a beta of 12 and an expected return of 17

a stock has a beta of 1.2 and an expected return of 17 percent. a risk-free asset currently earns 5.1 percent. the beta

  Importance of financial statements

Explain the importance of financial statements in relation to reporting organizational performance, how such financial statements link together, and the information that they provide for managers.

  What is the value of a bond that matures in 5 years

What is the value of a bond that matures in 5 years, has an annual coupon payment of $110, and a par value of $2,000? Assume a required rate of return of 8.69%. A. $1,876.99 B. $938.50 C. $1,891.36 D. $1,749.83

  What is the minimum expected annual return for stock

If Stocks 1 and 2 have expected returns of 9 percent and 10 percent per year, respectively, then what is the minimum expected annual return for Stock 3 that will enable Glenda to achieve her investment requirement?

  Budgeting process and capital investment decisions

Use the Internet or Strayer databases to research information related to the budgeting processes within the various types of health care organizations. Next, determine the most-effective budgeting approach for a hospital, indicating how this appro..

  Journal entries and calcutaions for asset sales

An asset that was purchased in Feb. 2008 for $25,000 has been depreciating through straight line value method for the past 4 years.

  Suppose this company loses sales on other models because of

nbspconfederation electronics is ad mid-sized electronic s manufacturer located in markham ontario. the company

  Find the maximum john and julia can borrow while taking

the majority of banks when making decisions on mortgage applications will look at two indicators salary and borrowing

  Beginning three months from now you want to be able to

beginning three months from now you want to be able to withdraw 2200 each quarter from your bank account to cover

  Describe the operating leverage this company possesses

Describe the operating leverage this company possesses?

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