Making annual coupon payments and all selling at face value

Assignment Help Operation Management

Reference no: EM131117556

Consider three bonds with 5.2% coupon rates, all making annual coupon payments and all selling at a face value of $1,000. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has maturity 30 years.

a. What will be the price of each bond if their yields increase to 6.2%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

4 Years = $

8 Years = $

30 Years Bond price = $

b. What will be the price of each bond if their yields decrease to 4.2%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

4 Years = $

8 Years = $

30 Years Bond price = $

c. Are long-term bonds more or less affected than short-term bonds by a rise in interest rates?

More affected

Less affected

d. Would you expect long-term bonds to be more or less affected by a fall in interest rates?

More affected

Less affected

Reference no: EM131117556

Questions Cloud

Write an equation for the problem : write an equation for the problem. then use the equation to answer the question.

Interest of justice an office : In the interest of justice an office exists constitutionally in Kenya to ensure that complaints from the members of the public against maladministration of public authorities are investigated to the extent of resolution.

Explain the motivation theory-abraham : Explain the Motivation Theory-Abraham H. Maslow's Hierarchy of Needs with suitable diagram and examples. Validate the theory by citing 2 notable characters or personality of your choice.

Explain why you included the instrument in your portfolio : Assume you are a portfolio/risk manager and your company just issued one such instrument bond linked to options from the list below. Explain why you included the instrument in your portfolio.

Making annual coupon payments and all selling at face value : Consider three bonds with 5.2% coupon rates, all making annual coupon payments and all selling at a face value of $1,000. The short-term bond has a maturity of 4 years, the intermediate-term bond has maturity 8 years, and the long-term bond has matur..

Demanding and receiving overtime pay : Some experts are concerned that if American white-collar workers increase their compensation by demanding and receiving overtime pay, then offshore labor will gain an even larger cost advantage, hurting U.S. companies. Do you agree or disagree?

Compute the mean and median : Do you agree that "if two events are mutually exclusive then these two events will be independent"? Why? Provide one business-related example each, with explanation, for mutually exclusive and independent events.

To bart perkins of computerworld : Some may argue that an ineffective IT organization could be outsourced, so sacrificing the ducks to save the rest of the IT function was best for the better performing employees. Do you agree?

Assume that the united states invests heavily in government : The U.S. income level increased substantially, while Country K's income level has remained unchanged. The United States is expected to impose a small tariff on goods imported from Country K. Combine all expected impacts to develop an overall forecast..

User Account

All Pages