Interest rate changes affect premium bonds and discount bond

Assignment Help Financial Management

Reference no: EM131937908

The Maryland Department of Transportation has issued 25-year bonds that make semiannual coupon payments at a rate of 9.925 percent. The current market rate for similar securities is 10.6 percent. Assume that the face value of the bond is $1,000.

(a) What is the current market value of one of these bonds? (Round intermediate calculations to 2 decimal places, e.g. 1.25 and final answer to 2 decimal places, e.g. 15.25.)

Current market value $

(b) What will be the bond’s price if rates in the market (i) decrease to 8.60 percent or (ii) increase to 11.6 percent? (Round intermediate calculations to 2 decimal places, e.g. 1.25 and final answers to 2 decimal places, e.g. 15.25.)

Bond's price

(i) Decrease to 8.60 percent $

(ii) Increase to 11.6 percent $

Bonds, in general, increasedecrease in price when interest rates go up. When interest rates decrease, bond prices decreaseincrease.

(d) Suppose the bond were to mature in 12 years. What will be the bond’s price if rates in the market (i) decrease to 8.60 percent or (ii) increase to 11.6 percent? (Round intermediate calculations to 2 decimal places, e.g. 1.25 and final answers to 2 decimal places, e.g. 15.25.)

(i) Bond's price if rate decrease to 8.60 percent $

(ii) Bond's price if rate increase to 11.6 percent $

Reference no: EM131937908

Questions Cloud

What can be mined from such an e-mail database : What are the differences between visual data mining and data visualization? What can be mined from such an e-mail database?

What happened to alex on the school bus : What happened to Alex on the school bus? Why was Kelby bullied? What did Ja'Meya do as a result of being bullied?

Variety of nutritional supplements : Visit a health food store or other store that carries a variety of nutritional supplements. Alternatively you can conduct research on the internet

Implementation of simple class to hold sets of playing cards : CSCI251/851 Advanced Programming Assignment. Requirements: This assignment involves the implementation of a simple class to hold sets of playing cards

Interest rate changes affect premium bonds and discount bond : How do the interest rate changes affect premium bonds and discount bonds?

Demographic markets could recruiting company possible enter : What other demographic markets could recruiting company possible enter, other than its current primary target demographic? Please add a reference!

Differences between european-americans and french people : Alice complains about how it is unfair that French people eat fattier foods but they have better cardiovascular health than Americans do.

Examine an environmental issue : Examine an environmental issue and apply one of the ethical theories to it to understand how human interactions with natural environment raise ethical concerns.

Classified as long-term capital gain : Sonya's profit on the transaction will be classified as a long-term capital gain

User Account

All Pages