Find the modified duration of each bond

Assignment Help Finance Basics
Reference no: EM13259981

Consider the following two bonds:
A 10-year zero-coupon bond with Macaulay duration 10 and yield to maturity 4%
A 5-year, 8% coupon bond with Macaulay duration 4.3 and yield to maturity 7%
a. Find the modified duration of each bond.
b. If market interest rates rise by 0.75%, find the percent change in the price of each bond. Express your answers as percentages rounded to two decimal places.

Reference no: EM13259981

Questions Cloud

What is the unlevered value of lsi : LSI recently issued $195,000 of perpetual 9% debt and used the cash to do a stock repurchase. Earnings for LSI are anticipated to be $83,000 annually before interest and taxes.
What are the expected return and standard deviation : What are the expected return and standard deviation of a portfolio with half of its funds invested in each of these securities?
Explain what is the effect of the propane addition : Additional pure propane is added to the system and the system is brought again to equilibrium at 10 bar and 323 K. What is the effect of the propane addition on the mole fractions of propane in the vapor and liquid phases
What is the speed of the spaceship : The length of a moving spaceship is 25.6 m according to an astronaut on the spaceship. what is the speed of the spaceship
Find the modified duration of each bond : If market interest rates rise by 0.75%, find the percent change in the price of each bond. Express your answers as percentages rounded to two decimal places.
Describe process you would follow to shortlist suppliers : Describe the process you would follow to shortlist suppliers for this purpose. How will you determine if the supplier is an approved National Health Service (NHS) supplier?
What is the linear speed of the disk : Suppose a disk of radius R and mass M starts from rest at a height of 2.5m, What is the linear speed of the disk when it leaves the incline
Find the conversion premium in dollars and in percent : Find the payback period. Explain what this means in your own words without quoting the definition of payback period. In addition, state whether or not this is considered to be an acceptable payback period.
What would a fully-taxable corporate bond have to yield : What would a fully-taxable corporate bond have to yield in order to produce the same after-tax return as the 5% municipal bond? Show work. Express your answer as a percentage rounded to two decimal places.

Reviews

Write a Review

Finance Basics Questions & Answers

  Computing present value of stock by retention rate on equity

Retention rate and experience the return on equity of 14%. The required rate of return for investor is 12.5%. Compute the present value of the stock is?

  Compute the amount at the end of the year

Suppose you have been hired to run a pension fund for TelDet Corporation, a small manufacturing firm. The firm currently has $5 million in the fund and expects to have cash inflows of $2 million a year for 1st 5-years followed by cash outflows of $3 ..

  Use of debt in capital structure

Why might firms whose sales levels change drastically over time choose to use debt only sparingly in their capital structures?

  Compute patent amortization

Alpha Enterprises acquired a patent from Simpson Research Company on 1/1/01 for $4million. The patent will have a useful life of ten years, even though it's legal life is twenty years.

  Calculation of yield to maturity on bonds and finding out

Calculation of yield to maturity on bonds and finding out reason and explain why the International Paper bond is selling at a premimum but Sara Lee is selling at a discount

  Formula for present value of settlement payments

A court settlement awarded an accident victim four payments of the $50,000 to be paid at the end of each of next four years.

  Calculate risk premium on common stock in each year

Here are stock market and Treasury bill returns between 2000 and 2004: Calculate the risk premium on common stock in each year?

  Computing current price of the stock

A Corporation will pay a $2 per share dividend in one year. The dividend in 2 years will be $4 per share, and it is expected that dividends will grow at 5% per year thereafter.

  Analyzing costs

How can a government be tempted to take a benefit cannot afford? What sounds better, $250,000 of increased services or $187,500 less in expenditures?

  Risk analysis of an investment

You believe Dr. Washington is now ready to begin risk analysis and is ready to understand the risk differences among various investments. The most basic fact you want to convey to him is risk and return?

  Determine the goal of negotiating

Determine the goal of negotiating? Discuss and explain why is planning critical to the negotiation processand when would an organization negotiate for an item or product instead of releasing a simple purchase order?

  Sum of years digits method versus straight line method

Joe's Lawn Service has asked you to develop many financial spreadsheets and a written memo to help him understand his finances for his business.

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