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Consider a 10-year zero coupon bond.
A. Using the bond pricing equation, P(y), illustrate the derivation (using calculus) of this bond’s modified duration. Note: the correct answer is an equation, not a number.
B. Assuming the yield-to-maturity is 5%, compute the bond’s modified duration.
C. Use your answer to part B to estimate the price of the bond and the percentage price change if interest rates instantaneously rise to 6%.
D. Use your answer to part B to estimate the price of the bond and the percentage price change if interest rates instantaneously decline to 4%.
E. How do the estimates from C. and D. compare to the true prices using the bond pricing equation P(y) if yields change to 6% and 4%? Is the estimate more accurate for part C. or D., and why?
Determine the after-tax equivalent present worth. Use life of three years and work to the nearest dollar.
How much do you need to deposit each year if your first deposit is now and the last deposit is 18 years from now to achieve this goal.
Rationale and Inhibitors for Statistical Process Control (SPC) You are the manager of corporate accounts in a multinational bank and are being considered for a significant promotion as a senior manager who will be responsible for managing SPC in the ..
Compare the annual cash outflows of the two payments. Why does the weeklyweekly payment plan have less total cash outflow each? year?
A ten year bond having a face value of $10,000 and coupon interest rate of 5.0% is priced to yield 6.5%. Interest is paid annually. At what price will the bond sell?
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A Hummer H3 sells for $92,000 tax included. GMAC lends money at the rate of 9.2 % APR. If you buy the car and borrow through GMAC, then what are the monthly? (end-of-month) payments for a 10 ?-year term? What is the amount of the monthly payment?
Martin Becker, age 64, owns and manages a commercial print shop in Maine. Martin plans to retire this year and has recently accepted an offer to sell this company for 1.8 million. Both children are married and currently employed. Dave has one son age..
Suppose that you do have money to pay for the phone and the interest rate on your saving account is 0.2%. Which is a better deal for you? Why?
A company agrees to repay a loan over five years. Interest payments are made annually and a sinking fund is built up with five equal annual payments made at the end of the year. Interest on the sinking fund is compounded annually.
Based on ROE for a sample of 20 banks for the year before and after the Sarbanes-Oxley Act, Choose at least three different significant levels to conduct the hypothesis test. Is it possible that a Type I error occurred with the hypothesis test? Why o..
According to the dividend growth model, the required rate of return is equal to the capital gains yield if the dividend growth rate is ______.
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