Explain the two components of interest rate risk

Assignment Help Financial Management
Reference no: EM131058345

1. Explain the two components of interest rate risk Are they affected by the maturity of the bond?

 2. Say your parents give you money for a 5 year olds college education. Assuming you had no intention of using your money for anything other than that purpose, what would be the approximate maturity of bonds that would minimize components of interest rate risk?

Reference no: EM131058345

Questions Cloud

Cash flows from investing activities-financing activities : In 2012, Usher Sports Shop had cash flows from investing activities of –$4,504,000 and cash flows from financing activities of –$5,950,000. The balance in the firm’s cash account was $1,629,000 at the beginning of 2012 and $1,770,000 at the end of th..
What is the most significant change in cash for the company : What is the most significant change in cash for this company in the 3 years from 2010 to 2012? Was there any change in stockholders' equity from 2011 to 2012?
Do you include any of practices in your classroom currently : Reflect on the seven motivational practices from chapter 3 of the text. Choose three of the practices that you believe are a weakness for you.If you are currently teaching, address these by answering the following for each of the practices: Do you ..
Determine the error associated with the answer : When numbers are multiplied or divided and you wish to determine the error associated with the answer, should their relative errors be multiplied or added to obtain the value? Please write multiplied or added in the box below for your answer.
Explain the two components of interest rate risk : Explain the two components of interest rate risk Are they affected by the maturity of the bond? Say your parents give you money for a 5 year olds college education. Assuming you had no intention of using your money for anything other than that purpos..
Number of titrations on different samples : If you perform a number of titrations on different samples of the sulpuric acid, you need to measure out 25.0 ml of the acid each time. Does the mean deviation of the volume of your pipette samples describe the precision or the accuracy of your wo..
Preparation of simple research proposal : Preparation of Simple Research Proposal. Your final assignment must contain the following: A. Research question/research issue
Discussing each of the option pricing models : Discussing each of the option pricing models and discussing the benefits and limitations of each model. Conclude with an explanation of which model represents the preferred model and/or whether each model should be used for specific types of options ..
Calculate the relative error for a value : Calculate the relative error for a value of 0.4 and an absolute error of 0.0006. Remember absolute error = value x relative error.

Reviews

Write a Review

Financial Management Questions & Answers

  An investment project provides cash inflows

An investment project provides cash inflows of $690 per year for eight years. What is the project payback period if the initial cost is $1,475?  What is the project payback period if the initial cost is $3,500? What is the project payback period if t..

  What is the after tax cash flow from sale of the property

A property is sold for 5,100,000 with selling costs of 3% sales price. The mortgage balance at the time of sale is 3,600,000 . The property was purchased 5 years ago for 4,820,000. Annual depreciation allowances of 153,016 have been taken. If the tax..

  Based strictly on the calculations

Based strictly on the calculations, which proposals should be accepted or rejected. Use the appropriate divisional discount rate. The net present value provides the answer directly while the internal rate of return must be compared to the discount ra..

  Calculate utility level investors obtain from portfoliors

The expected return on the S&P 500 index is 12%. The return on the T-bill is 5%. The standard deviation of return on the S&P 500 index is 18%. Investors can form portfolios from these 2 securities. Suppose investors have a utility function of the fol..

  Compensation package is unaffected by the profits

Explain how agency costs might be found within a firm whose CEO owns no shares in the firm and whose compensation package is unaffected by the profits (cash or accounting profits) of the firm.

  The effective annual interest rate for this account

At the end of each year, for 20 years, I deposit $1000 dollars into an account. The effective annual interest rate for this account (called account 1) is 5%. At the end of each year, i take the interest I am paid from this account and invest it into ..

  Cost of trade credit

If a firm buys under terms of 3/15, net 30, but actually pays on the 20th day and still takes the discount, what is the nominal cost of its nonfree trade credit? Assume 365 days in year for your calculations. Does it receive more or less credit than ..

  What is the present value of the cash flow stream

You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. If the appropriate interest rate is 6 percent, what is the present value of the cash flow stream that the company ..

  Dividends are expected to grow at compound annual rate

An Allied Northern preferred stock pays a $3.84 annual dividend. What is the value of the stock to an investor who requires a 9.5% return? What is the value of the share of stock of HOV Inc., to an investor who requires a 12% rate of return if HOV’s ..

  What is the expected rate of return

A company’s preferred stock is issued it $25 with promised evidence of 3% of four. Current price of the stock is $61. What is the expected rate of return?

  What is the effective price paid by the company for the oil

On March 1 the price of oil is $50 and the July futures price is $49. On June 1 the price of oil is $56 and the July futures price is $54. A company entered into a futures contract on March 1 to hedge the purchase of oil on June 1. It closed out its ..

  Which of the three right side components of the dupont

If you were a manager of a company, which of the three right side components of the DuPont Identity would you want to increase and which would you want to decrease, other things being equal? Give a specific example for how to do that for each of the ..

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