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Both bond A and bond B have 10 percent coupons and are priced at par value. Bond A has 10 years to maturity, while bond B has 20 years to maturity. a. If interest rates suddenly rise by 1 percent, what is the percentage change in price of bond A and bond B? (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Bond A % Bond B % b. If interest rates suddenly fall by 1 percent instead, what would be the percentage change in price of bond A and bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Bond A % Bond B %
You were recently having a family dinner with your uncle who is a Senior Vice-President at one of the companies that produces auto parts. He told you, during the dinner, that he has received an offer to be the CEO of another auto part manufacturing c..
What is a measure of the sensitivity of a stock or portfolio to market risk?
Western Enterprises’ bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon rate is 9 percent. The bonds have a yield to maturity of 7 percent. What is the current market price of these..
Suppose that an I-bank is offering the exact same forward as (b) but with a rate strictly lower than the rate that you found in (b). Find an arbitrage implementation to capitalize on the arbitrage opportunity for a long position of the forward.
capital budgeting analysisthe sl energy group is planning a new investment project which is expected to yield cash
Kelly's Corner Bakery purchased a lot in Oil City 6 years ago at a cost of $302,000. Today, that lot has a market value of $340,000. At the time of the purchase, the company spent $15,000 to level the lot and another $20,000 to install storm drains. ..
Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 5% and the market risk premium is 5%. Van Buren currently expects to pay a year-end dividend of $1.70 a share (D1 = $1.70). Van Buren..
Heaton Corp. sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were $455,000, and its year-end receivables were $60,000. If its DSO is less than the 45-day credit period, then customers are paying on time. Otherw..
A stock you are interested in paid a dividend of $1 last year. The anticipated growth rate in dividends and earnings is 20% for the next year and 10% the year after that before settling down to a constant 5% growth rate. The discount rate is 12%. Cal..
problem 1pre-contribution balance sheets and fair valuesjune 30 20x9in thousands of
Funding Jill Moran’s Retirement Annuity: Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Jill Moran. Ms. Moran by contract, will retire at the end of exactly 12 years. How large a sum ..
The state of Indiana charges a retail sales tax of 7%. Consider the following information for three households: Calculate tax liability for each household. What is the average tax rate for each household? What is the marginal tax rate for each househ..
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