Using the modified duration with convexity rule

Assignment Help Financial Management

Reference no: EM132068545

1. Assuming its yield to maturity increases from 7% to 8% with maturity unchanged. Calculate the predicted price using the modified duration with convexity rule, and the percentage error of this rule.

2. A 3,000 loan at an annual effective rate of interest of 6% is repaid with 3 annual payments of 750, plus a balloon payment at the end of year 4. Determine the amount of the balloon payment

3. Ron borrows 20,000 for 20 years at annual interest rate of 10% convertible semiannually. He repays 500 in interest at the end of each 6 months. The principal and the remaining accrued interest are to be repaid at the end of 20 years by equal deposits at the end of each 6 months to a sinking fund that accumulates at 8% convertible semiannually. How much must Ron deposit in the sinking fund each 6 months?

Reference no: EM132068545

Questions Cloud

Considering two projects with the cash flows : Your division is considering two projects with the following cash flows (in millions). What are the projects' NPVs assuming the WACC is 5%?

Most appropriate source of debt capital for that business : Briefly describe a small business you could envision yourself owning and discuss the most appropriate source of debt capital for that business.

Knowing the federal reserve discount rate : What are two ways that a financial institution can benefit from knowing the Federal Reserve Discount Rate.

How much can she withdraw from her retirement savings : How much can she withdraw from her retirement savings each month if she plans to spend her last penny on the morning of her death?

Using the modified duration with convexity rule : Calculate the predicted price using the modified duration with convexity rule, and the percentage error of this rule.

What is your proposed choice for the legal form of business : What are the different legal forms of business that you might consider ? What is your proposed choice for the legal form of business?

Calculate the duration and convexity of the bond : Calculate the duration and convexity of the bond.

Forward rate agreements can be used for speculative purposes : Forward rate agreements can be used for speculative purposes. If one believes rates will be less than the agreement rate,

Variable portion of costs through the high-low method : The Metropolis Health System has a system-wide training course for nurse aides. find the fixed and variable portion of costs through the high-low method.

User Account

All Pages