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You are considering buying a 30-year U.S. Treasury bond but are nervous about the effect on bond price if the yield to maturity on the bond increases. The bond has a 3% coupon rate and pays coupons semi-annually. The duration is 20 years.
Suppose that interest rates on this bond rise by 2%. Calculate the corresponding percentage change in the price of the bond using the approximation method base on bond duration.
Give your answer in percent to one decimal place. If the price decreases, then include a minus sign; if the price increases, do not include any sign. Do not type the % symbol.
The spot exchange rate is 1.57 dollars per pound. The 30-day forward exchange rate is .6211 pounds per dollar. Therefore, pounds in the forward market are selling at a ________ to the current spot rate.
What is the effective annual interest rate on this lending arrangement? How much interest will you pay?
Barnes Enterprises has bonds on the market making annual payments, with 17 years to maturity, a par value of $1,000, and a price of $969. At this price, the bonds yield 8.1 percent. What must the coupon rate be on the bonds?
Recreate the real Case-Shiller index for the Los Angeles by similarly obtaining the necessary data from a web-search (Standard and Poor’s). Note that the index you download will be a nominal index. Show both the nominal and real indexes on one plot, ..
When a firm uses a permanent debt, the present value of the associated interest tax shield:
Krystal is a U.S.-based company that manufactures, sells and installs water purification equipment.
A company car is in a wreck and the company expects to have to pay a substantial sum to persons who were injured.
Sovereign Bond issued by the government of ‘King’s Landing’.
John owns real estate with a fair market value of $1 million in which he has a basis of $250,000. In 2005, John sold the property to his son, Junior, for $1 million, subject to an installment note. Junior must pay the $1 million plus interest over 5 ..
Which of the following is the most relevant measure of risk for capital budgeting purposes?
Calculate the value of your selected barrier option and use it with the results you obtained in part a or b to determine the price of a standard European call or put.
Assume the annual average return on the S&P500 is 13.7% with a standard deviation of 17.5%. A risk-free asset has an annual average return of 4.0% with a standard deviation of 0.0% and a correlation with the S&P500 index of +0.00. An investor invests..
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