Explain the concept of bond duration

Assignment Help Finance Basics
Reference no: EM133061424

An Australian Commonwealth Government Security (CGS) has a maturity date of 15 March 2023. The CGS is paying a coupon of 6% and is priced at a yield of 4%. The CGS pays coupons semi-annually on the 15th of the relevant coupon payment month. The settlement date of the trade in this bond is 24 June 2021. There is a zero coupon bond with exactly two years until maturity (i.e. the maturity date is 24 June 2023). The zero coupon bond has a yield to maturity of 4%. The yield curve is flat at 4% per annum. Please use semi-annual compounding when answer the following questions.

c) Explain the concept of bond duration and why this measure is meaningful to investors.

d) Explain the concept of bond immunization and the benefits derived from using this technique.

Reference no: EM133061424

Questions Cloud

Find the amount needed at maturity to generate interest : Find the amount needed at maturity to generate $1,350 per month interest, if they can get 7 1/4 interest compounded monthly
What is the conversion value : What is the conversion value if the straight bond value is equal to the bond's par value?
What is the valuation for gps : EBV has invested a $10M Series A investment in Newco. EBV estimates three possible outcomes with an expected exit time in 5 years with final ownership fraction
What tax consequences to Courtney and Kurt : The inventory has a basis to Kurt of 55,000. What tax consequences to Courtney and Kurt? What basis will Radical have in the property received
Explain the concept of bond duration : An Australian Commonwealth Government Security (CGS) has a maturity date of 15 March 2023. The CGS is paying a coupon of 6% and is priced at a yield of 4%. The
Explain the concept of bond immunization : An Australian Commonwealth Government Security (CGS) has a maturity date of 15 March 2023. The CGS is paying a coupon of 6% and is priced at a yield of 4%.
What is the macaulay duration of step : Afin-Super is the largest superannuation and pension fund in Macquarieland. To promote pension and annuity service, Afin-Super is serving a short-term experienc
Find the unpaid balance on her loan : Shirley Trembley buys a house for $188,200. Ten years and six months later, she sells her house. Find the unpaid balance on her loan
Calculate the maximum sharpe ratio portfolio : Suppose you are a US investor looking for international diversification opportunities. Your investment advisor offers you an international equity index that exp

Reviews

Write a Review

Finance Basics Questions & Answers

  What would be the beta of your portfolio

If I invested 90% of my wealth in the market portfolio and the remainder of your wealth elsewhere. What would be the beta of your portfolio?

  What is the net present value of the investment in the

a new furnace for your small factory will cost 4500 a year to install and will require ongoing maintenance

  E-commerce to evolve into a global operation

Describe how companies can utilize technology and e-commerce to evolve into a global operation

  What is labour cost

What is Labour Cost and the information technology shop of Glob us Enterprises is developing software to control the manufacturing processes of a chemical plant

  What is the planned percentage increase in sales

Planned sales for the month of September are $63,147. If last year's actual sales for the same month were $59,423, what is the planned percentage increase.

  Improvements for estimation of cost of equity capital

Suggest three improvements for estimation of cost of equity capital, considering the current economic and business conditions during the covid19 pandemic.

  Required rate of return

What stock price is expected 1 year from now? Round your answer to two decimal places. $ What is the required rate of return? Round your answers to two decimal places. %

  What monthly withdrawal can you make

You decide to open a retirement account at your local bank that pays 9%/year/month (9% per year compounded monthly). For the next 20 years, you will deposit.

  Review the case study of Warren E buffet

What does the stock market seem to be saying about the acquisition of GEICO by Berkshire Hathaway? Based on your own analysis, what do you think GEICO is worth on its own (i.e., before acquisition by Berkshire Hathaway)?

  Compute the current price of stock

Bayside will pay a dividend on common stock of $4.80 per share at the end of the year. The required return on common stock (Ke) is 13.2%. The firm has a constant growth rate of 7.2%. Compute the current price of stock (Po)

  Formulate the problem of deciding current week

Formulate the problem of deciding how much of each product to make in the current week as a linear program.

  Number of units shipped during a month

Confederate Express is attempting to determine how its monthly shipping costs depend on the number of units shipped during a month. The file P11_48.xlsx contains the number of units shipped and total shipping costs for the last 15 months.

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd