How will the expected return on this bond change

Assignment Help Econometrics
Reference no: EM131141909

Imagine a short-term corporate $1,000 bond that promises to pay 8 percent interest over three years. This bond will pay $80 at the end of the first year and the second year, and $1,080 at the end of the third year. After one year, however, the market interest rate has increased to 12 percent. What will the bond be worth to an investor who is not too concerned about risk at that time? If the firm appears likely to go bankrupt, how will the expected return on this bond change?

Reference no: EM131141909

Questions Cloud

Evaluate impact that different types of feedback practices : Discuss what differentiates "good feedback practices" from "bad feedback practices." Evaluate the impact that these different types of feedback practices may have on employees at Matrix.
What is the efficient market theory : What is the efficient market theory? What implications does it have for whether you can beat the market? Does it imply that all stocks must yield the same expected return?
Describe the stated purpose of cryonic suspension : Describe the stated purpose of cryonic suspension to a person with a psychological disorder
Will a risk-averse person buy a ticket in this lottery : What is the expected return to buying a ticket in this lottery? Will a risk-averse person buy a ticket in this lottery?
How will the expected return on this bond change : What will the bond be worth to an investor who is not too concerned about risk at that time? If the firm appears likely to go bankrupt, how will the expected return on this bond change?
Write a paper on diversity and membership issues : Write a paper and addresses all of the assignment- Diversity and Membership Issues - Overview of the Adult in Environmental Context Facing a Challenge.
Determine one factor for each of porter five forces : Examine service categories commonly provided by nursing homes. Determine two specific service categories that you believe are common factors of competition among nursing homes. Justify your response.
How trevino''s perspective fits the efficient market theory : Why would a stranger want to make me a million?" Explain how Trevino's perspective fits the efficient market theory
Examine the economic trends and impact of globalization : Examine the economic trends and impact of globalization in the chosen market and determine which of those emerging factors have potential for disruption that could affect operations.

Reviews

Write a Review

Econometrics Questions & Answers

  What is price of oil and quantity of oil produced by cartel

Suppose that 3 countries who form a cartel agreed to divide the oil market equally. Demand for oil is given by P=50-.1Q where P is the price of oil in dollars per barrel and Q is the Quantity in thousands of barrels per day.

  What will his newlevel of utility be

change if Robinson adjusts his production to takeadvantage of the world prices?

  Identify the current required reserves and excess reserves

Instead of transaction B (above), assume the Federal Reserve buys $50,000 worth of securities from the bank, what is the maximum amount of money that can be created by this single transaction

  Prove that there does not exist a steady-state equilibrium

Prove that there does not exist a steady-state equilibrium.

  Compare the labor market statistics of your local community

Find information about labor market statistics of your local community over the last 3 years

  Find out the optimal crude oil allocation in the proceeding

Firms often face the problem of allocating an input in fixed supply among different products. Find the optimal crude oil allocation in the proceeding example if the profit associated with fiber were cut in half, that is, fell to $0.375 per square ..

  What is the profit-maximizing price of carpets

The owners decide to begin spending immediately a rather large sum on advertising designed to decrease elasticity. Should they wait until new firms actually enter. Explain how advertising can be employed to allow Tots-R-Us to keep price.

  Calculate the expected rate of return from investment b

The following table gives the joint PDF of random variables X and Y, where X = the first-year rate of return (%) expected from investment A, and Y= the first-year rate of return (%) expected from investment B. Rates of Return on Two investments

  Find the monopolist profit

you are a manager of a monopoly firm, and your demand and cost functions are given by: P=288-2Q and C(Q)=1000+2Q2, respectively. A) What price quantity combination maximizes your firm's profit B) Find the monopolist profit

  How much should the firm produce to maximize profits

Suppose the market for cotton is perfectly competitive. A representative firm's short-run marginal cost is given by SRMC=5+Q, while their minimum average variable cost is $7. If the market price of cottion is $20 per unit, how much should the firm..

  Would you expect ticket revenue to rise or fall

A minor league baseball team is trying to predict ticket sales for the upcoming season and is considering changing ticket prices. a. The elasticity of ticket sales with respect to the size of the local population is estimated to be about 0.7.

  Advanced analysis given the following diagrams q1 12 bags

advanced analysis given the following diagrams q1 12 bags. q2 7 bags. q3 19 bags. the market equilibrium price point

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