Expected percentage price change of this bond

Assignment Help Financial Management

Reference no: EM131059915

Jackson Central has a 8-year, 8% semi-annual coupon bond. Jackson Central bond’s currently sells for 111. According to data, a 8-year, 8% Treasury bond sells for 125. As a bond investors who owns this bond, you envision that due to a rise in inflation, in three years, Treasury yields would increase by 1.5%. However, since the increase in inflation is due to an improving economy, the credit spread of Jackson Central would decrease by 90 basis points. What is the expected percentage price change of this bond?

Reference no: EM131059915

Questions Cloud

Friction with the earth atmosphere : 1. Due to friction with the Earth's atmosphere, a large static electric charge could build up on our plummeting asteroid fragment. Would you expect our fragment to generate a magnetic field? Explain why or why not.

What was the standard deviation of crash-n-burn returns : You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 18 percent, –3 percent, 16 percent, 11 percent, and 10 percent. hat was the arithmetic average return on Crash-n-Burn’s stock over this five-year period?..

Company will pay its first annual dividend in the amount : The Sooner Fracers Inc. is a new firm in a rapidly growing industry. The company will pay its first annual dividend in the amount of $0.20 per share in four years. Afterwards, the company increases its annual dividend by 20% a year for the next four ..

Covariance matrix with latent roots ? and latent vectors : Consider the (4 X 4) covariance (correlation) matrix of Example 3.2. Verify the results of Theorem 3.8. Also verify that latent vectors of P are orthogonal unit vectors.

Expected percentage price change of this bond : Jackson Central has a 8-year, 8% semi-annual coupon bond. Jackson Central bond’s currently sells for 111. According to data, a 8-year, 8% Treasury bond sells for 125. What is the expected percentage price change of this bond?

Arithmetic versus geometric returns : Risk and Return We have seen that over long periods stock investments have tended to substantially outperform bond investments. However, it is not at all uncommon to observe investors with long horizons holding their investments entirely in bonds. Ar..

Relationships between electricity and magnetism : 1. Draw a simple series circuit consisting of the following components: a. battery voltage source of 6 volts,

What the investor should pay for the mortgage instrument : A mortgage instrument pays $2.5 million at the end of each of the next two years. An investor has an alternative investment with the same amount of risk that will pay interest at 8% compounded monthly. Which of the following amounts is closest to wha..

Investment opportunity that offer annual operating cash flow : Assume that you are looking at an investment opportunity that offers an annual operating cash flow of $40,000 per year for 4 years. The initial investment to purchase the necessary equipment is $200,000. You assume that you can sell the equipment at ..

User Account

All Pages