Explain why the bonds price declined despite the fact

Assignment Help Financial Management
Reference no: EM131312823

Suppose that two years ago a 10-year bond in your portfolio was selling for $1,100.

Today, the same bond is selling for $1,050. You have researched the price of 10-year bonds of the same credit rating over the past two years and found that interest rates have declined.

Explain why the bond's price declined despite the fact that 10-year interest rates have declined.

Reference no: EM131312823

Questions Cloud

Why is leadership important for lawyers : What is leadership? How do you define leadership?Why is leadership important for lawyers? What are the most important attributes or competencies of leaders? You can, for example, described some of the practices of exemplary leadership as discussed..
Federal statutory tax rate : How is it possible for a U.S. firm to have an effective tax rate that is less than the U.S. federal statutory tax rate?
Determine the worst case time-complexity : Evaluate the map() method of your implementation of the Colormap ADT from the previous question to determine the worst case time-complexity.
Breakeven stock price at expiration on the transaction : Consider a stock priced at $30 with a standard deviation of 0.3. The risk-free rate is 0.05. There are put and call options available at exercise prices of 30 and a time to expiration of six months. The calls are priced at $2.89 and the puts cost $2...
Explain why the bonds price declined despite the fact : Suppose that two years ago a 10-year bond in your portfolio was selling for $1,100.- Explain why the bond's price declined despite the fact that 10-year interest rates have declined.
Design of the cross-section should be most-economical : HYDRAULICS - 2 CIVL 0018 - Design the drainage system (cross-section of channels) for the particular rainfall and given catchment area and Design of cross section should be safe for the return period of 25 years or more.
Expect dividends to grow perpetually : Netscrape Communications does not currently pay a dividend. You expect the company to begin paying a $4.6 per share dividend in 8 years, and you expect dividends to grow perpetually at 6.1 percent per year thereafter. If the discount rate is 12 perce..
Relationship between increased social responsibility : What is the relationship between increased social responsibility and IT at the workplace? Answer in about two paragraphs with reference.
Why is it difficult to value a callable bond : Which of the following two bonds has greater reinvestment risk: a 10- year 8% coupon bond or a 25-year zero-coupon bond? Why? Why is it difficult to value a callable bond?

Reviews

Write a Review

Financial Management Questions & Answers

  What is not one of the factors that affect nominal spreads

Which security provides the lowest bid-ask spread. What is not one of the factors that affect nominal spreads?

  Self-supporting growth rate

Maggie's Muffins, Inc., generated $4,000,000 in sales during 2013, and its year-end total assets were $2,800,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..

  Computed the weighted cost of capital

Macintosh computers can purchase a piece of equipment that is suspected to yield an 11% return in 10 be financed at 6% with debt. Later in the year the Company said no to the opportunity to purchase a newer machines that would yield a 9% return or co..

  Risk-free rate have to for two stocks to correctly priced

Stock Y has a beta of .9 and an expected return of 12.6 percent. Stock Z has a beta of .6 and an expected return of 8.9 percent. What would the risk-free rate have to be for the two stocks to be correctly priced?

  How important is the funds rate of return

Calvin Jacobs is a widower who recently retired after a long career with a major Midwestern manufacturer. Beginning as a skilled craftsman, he worked his way up to the level of shop supervisor over a period of more than 10 years with the firm. Assume..

  What is the amount of operating cash flow-long-term debt

The beach house has sales of $784, 000 and profit margin of 8 percent. The annual depreciation expense is $14, 000. What is the amount of the operating cash flow if the company has no long-term debt?

  Annual operating costs

Machine A was purchased last year for $20,000 and had an estimated MV of $2,000 at the end of its six-year life. Annual operating costs are $2,000. The machine will perform satisfactorily over the next five years. A trade-in allowance of $10,400 has ..

  What is the correlation between the two securities

Suppose you own a two-security portfolio. You have 54% of your money invested in Security X and the remainder in Security Y. The standard deviations of Securities X and Y are 30 percent and 25 percent. What is the correlation between the two securiti..

  What is the equity multiplier

The Corner Store has sales of $72,510, total assets of $60,400, a debt-equity ratio of 1.2, and a profit margin of 3 percent. What is the equity multiplier?

  Expected salvage value-plant and equipment

The Chester Company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. The expected salvage value at the end of 15 years is $4,090,000. What will the book value of this purchase (exclude all other pla..

  Bond valuation

Bond X is noncallable and has 20 years to maturity, a 9% annual coupon, and a $1,000 par value. Your required return on Bond X is 10%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield t..

  Estimate your exposure to the exchange risk

Suppose that you hold a piece of land in the city of London that you may want to sell in one year. Estimate your exposure to the exchange risk

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