Coupon bond with face value

Assignment Help Business Economics

Reference no: EM13898540

You just purchase a coupon bond with a face value of $1000, 6% coupons, and three years remaining to maturity. Assume that all markets are 7% A) what is the duration of this bond B) Compute the exact price change(using the present value formula) if interest rates drop to 6.75% C) Use the duration to compute the approximate price change due to a drop in interest rates to 6.75%. How large is the approximate error (in dollars)?

Reference no: EM13898540

Questions Cloud

How should wage rates be determined : Why might a company choose to produce in one low-cost country rather than another? Now consider what new challenges come from producing in foreign locations. For your new global product/service: How should wage rates be determined?

What are at least two diagnostic checks : What are at least two diagnostic checks you should apply to a Box-Jenkins model to determine its reliability (excluding error measures such as MSE, RMSE, etc.)?

Demand and supply condition in market for unskilled labor : Demand and Supply Curves. Demand and supply condition in the market for unskilled labor are important concerns to business and government decision makers. Consider the case of a federally mandated minimum wage set above the equilibrium, or market cle..

Demand analysis-decrease the quantity demanded : Demand Analysis: The demand for housing is often described as being highly cyclical and very sensitive to housing prices and interest rates. Given these characteristics, describe the effect of each of the following in terms of whether it would increa..

Coupon bond with face value : You just purchase a coupon bond with a face value of $1000, 6% coupons, and three years remaining to maturity. Assume that all markets are 7% A) what is the duration of this bond B) Compute the exact price change(using the present value formula) if i..

Two-period model for a nonrenewable resource : Hotelling’s rule. Using the (graphical) two-period model for a nonrenewable resource, analyze the effects of the following on equilibrium prices and quantities in the market for that resource:

Industries as social networking or transpiration : When you describe the optimal conditions explain whether they apply across all industries or are peculiar to a particular industry. Are these times tested? That is, have these conditions occurred over the past 100 or more years and continue today pos..

Consumers have a willingness to pay different prices : "Price discrimination begins and ends with a firm having market knowledge that its customers/consumers have a willingness to pay different prices." How is this type of information collected and by who? how reliable is it?

Do the same assuming the bank invests in risky loans : Suppose a bank has 100 million dollars of assets to invest. It can either invest in risky or safe loans. Safe loans will be worth $105 M in one year with certainty. Risky loans will be worth either $70 M or $130 M in one year, each with equal probabi..

User Account

All Pages