Explain the relationship between interest rates and duration

Assignment Help Financial Management
Reference no: EM131881324

a. What is the duration of a 5-year 5% annual coupon bond with a par value of $100 if the prevailing continuously compounded interest rate is 6%?

b. What is the duration of a 5-year 8% annual coupon bond with a par value of $100 if the prevailing continuously compounded interest rate is 6%? What does this tell you about the relationship between coupon rates and duration? Comment.

c. What is the duration of a 5-year 5% annual coupon bond with a par value of $100 if the prevailing continuously compounded interest rate is 9%? What does this tell you about the relationship between interest rates and duration? Comment.

Reference no: EM131881324

Questions Cloud

Determine the amount of the projected benefit obligation : On January 1 of the current reporting year Coda Company's projected benefit obligation. Determine the amount of the projected benefit obligation at December 31.
What will be the payouts to each class of claimant : The second-lien is subordinated to the first-lien in its claim to any collateral. In liquidation, what will be the payouts to each class of claimant.
Estimate the amount of variable costs : Using the information provided above, and your knowledge of CVP analysis, estimate the amount of variable costs
Why can we use rough estimates when applying learning curves : Why can we use rough estimates when applying learning curves?
Explain the relationship between interest rates and duration : What is the duration of a 5-year 5% annual coupon bond with a par value of $100 if the prevailing continuously compounded interest rate is 6%?
Discuss the benefits of the consolidating multiple companies : From a conceptual and practical standpoint please discuss the benefits and/or negatives of the consolidating (financial statements) multiple companies.
How much would be the january amount recorded to expense : The purchase was recorded to Prepaid Insurance. How much would be the January 31 amount recorded to expense (use two decimals).
Differences between independent and dependent demand : 1. How can forecasting improve your operations and supply chain processes? What are the differences between independent and dependent demand?
Why is efficient inventory management important : Why is efficient inventory management important and what are the functions of inventory?

Reviews

Write a Review

Financial Management Questions & Answers

  What are the two primary drawbacks to payback period method

What are the two primary drawbacks to the payback period method?

  What is amount of the collection float as of end of day

What is the amount of the collection float as of the end of the day?

  Calculate payback-discounted payback-net present value

A consumer product firm finds that its brand of laundry detergent is losing market share, so it decides it needs to “freshen” the product. One strategy is to maintain the current detergent formula but to repackage the product. Calculate the payback, ..

  What is the cash flow from disposal

Reversing Rapids Co. purchases an asset for $119,380. This asset qualifies as a five-year recovery asset under MACRS. what is the cash flow from disposal?

  How much new long-term debt financing will be needed

At year-end 2013, Wallace Landscaping’s total assets were $1.6 million and its accounts payable were $395,000. Sales, which in 2013 were $2.5 million, are expected to increase by 25% in 2014. Total assets and accounts payable are proportional to sale..

  Compare annual cash outflows of the two payments

Sam Hinds, a local dentist, is going to remodel the dental reception area and add two new workstations. Compare the annual cash outflows of the two payments.

  Planning to make an additional investment

Mr. Smith is planning to make an additional investment at the end of each year for his retirement in 20 years.

  Determine the equivalent discount rate

Determine the equivalent discount rate for the following? periods: a. Six months b. One year c. One month

  Firm wishes to maintain an internal growth rate

A firm wishes to maintain an internal growth rate of 9.5 percent and a dividend payout ratio of 42 percent. The current profit margin is 6.4 percent and the firm uses no external financing sources. What must total asset turnover be?

  Financial planning time value of money

Morton notes that the $55,000 in the single premium life insurance policy would grow to $176,392 in 20 years for a return of 6% a year.

  What was the probable reason he was not covered

Antoine LaDuke suffered a major loss on his older home due to mud from a flood. Although he had homeowner's insurance, what was the probable reason he was not covered?

  What is the cost of this investment strategy

You establish a straddle on Walmart using September call and put options with a strike price of $49. What is the cost of this investment strategy?

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