Error between duration prediction and actual market values

Assignment Help Financial Management

Reference no: EM131012194

MLK Bank has an asset portfolio that consists of $200 million of 15-year, 12.5-percent-coupon, $1,000 bonds with annual coupon payments that sell at par. a-1.

What will be the bonds’ new prices if market yields change immediately by ± 0.10 percent

What will be the new prices if market yields change immediately by ± 2.00 percent?

The duration of these bonds is 7.4620 years. What are the predicted bond prices in each of the four cases using the duration rule?

What is the amount of error between the duration prediction and the actual market values?

Reference no: EM131012194

Questions Cloud

Analysis of a television show : You will conduct a media analysis of a television show, film, advertising campaign or popular musical artist/video. The final paper is lengthy, but allows you to revise prior writing assignments in order to construct a finished product that incorp..

Calculate the aeration period : The operating conditions are an effluent suspended solids of 20 mg/1, an MLSS concentration of 2500 mg/1 and an activated sludge wasting rate of 160 m3/day containing 8000 mg/1. Calculate the aeration period (7.4 hr) and Calculate the BOD loading (..

Financial calculators do not operate in this way : If we input a positive PV in our calculator, we get a negative FV if that is what we are solving for. The reverse it true as well. Put in a positive, and the answer is negative. This is true of all financial calculators and is referred to as the ____..

External factor of economic conditions can be overcome : If the organization has the supplies it needs then functions of the employees are not hinders however, if supplies are scarce, then staff will not be able to perform duties to the best of their ability and clients will be unsatisfied hence the org..

Error between duration prediction and actual market values : MLK Bank has an asset portfolio that consists of $200 million of 15-year, 12.5-percent-coupon, $1,000 bonds with annual coupon payments that sell at par. a-1. What will be the new prices if market yields change immediately by ± 2.00 percent? What is ..

What was your personal response to the song : What was your PERSONAL response to the song? How does what you saw, heard and felt connect to the materials you've read in class

What annual interest rate-save any additional funds : Your parents will retire in 20 years. They currently have $230,000, and they think they will need $1 million at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer..

Sharp decline in cash is puzzling : As can be seen from the following statements, only $22,000 in cash was available at the end of 2015. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to ..

Determine the gross water supply reservoir volume : Determine the gross water supply reservoir volume for the following information: City population: 200,000 Water consumption rate: 568 Lpcd Catchment area: 103 Km^2 Rainfall rate: 110cm/yr Annual soil evaporation: 50cm Minimum net reservoir volume:..

User Account

All Pages