Find the modified duration-what is the exact change in price

Assignment Help Financial Management

Reference no: EM13804425

Consider a 30-year corporate bond paying 9 percent semi-annual coupon. The current yield to maturity is 11 percent.

a. Find the modified duration.

b. Refer to part a. If the interest changes by 25 basis points, what is the exact change in price?

c. Refer to part b. If the interest changes by 25 basis points, what is the approximate change in price?

Reference no: EM13804425

Questions Cloud

Create a weighted ranking : Create a weighted ranking according to your own evaluation of the features and specifications of each software package

Shares of common stock outstanding : Roth Corp. wants to raise $4.4 million via a rights offering. The company currently has 540,000 shares of common stock outstanding that sell for $42 per share. Its underwriter has set a subscription price of $30 per share and will charge the company ..

The growth rate for the firms common stock : The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of five dollars. What is the preferred stock price if the required rate of return is 8%.

What is the rate of return-define the goal or objective : An investor has invested $250,000 in a new rental property. Her estimated annual costas are $6,000 and annual revenues are $20,000. What rate of return per year will the investor make over a 30-year period ignoring the salvage value? If the property ..

Find the modified duration-what is the exact change in price : Consider a 30-year corporate bond paying 9 percent semi-annual coupon. The current yield to maturity is 11 percent. Find the modified duration. Refer to part a. If the interest changes by 25 basis points, what is the exact change in price?

What will be his after-tax yield to maturity : An investor purchases a 30-year U.S. government bond for $840. The bonds coupon rate is 10 percent and, it still had twelve years remaining until maturity. If the investor holds the bond until it matures and collects the $1000 par value from the Trea..

What will be the new level of non-borrowed reserves : Suppose the banking systems non-borrowed reserves total $58.3 billion with total legal reserves standing at $65.2 billion. What must borrowed reserves be? This morning the Federal Reserve decided to undertake the purchase of $700 million in governmen..

What do the proportions of debt and equity add to : A firm’s WACC is 13%, its required return on equity is 17%, and its after-tax cost of debt is 6%. What proportion of the firm’s capital structure is debt, and what proportion is equity? (Hint: what do the proportions of debt and equity add to?)

What is the size of the transaction deposit multiplier : Suppose that the public wishes to hold $0.35 in pocket money (currency and coin) and $0.25 in time and savings deposits. Suppose that banks wish to hold $0.20 for each new dollar of transaction money received. What is the size of the transaction depo..

User Account

All Pages