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Consider a 6.2 percent coupon bond with five years to maturity and a current price of $1,064.70. Suppose the yield on the bond suddenly increases by 2 percent.
a. Use duration to estimate the new price of the bond. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Price $
b. Calculate the new bond price. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
It is often said that anyone with a pencil can calculate financial ratios, but it takes a brain to interpret them. What kinds of things should the analyst keep in mind when evaluating the financial statements of a given firm?
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If the yield curve is downward sloping, which of the following statements is correct? (hint: graph the yield curves for a T- bond, a AAA bond, and a B bond)
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