What is the price of the consol

Assignment Help Financial Management

Reference no: EM131825339

You are considering purchasing a consol that promises annual payments of $4.

a. If the current interest rate is 3 percent, what is the price of the consol?

Instructions: Round your answer to the nearest penny (2 decimal places).

The price of the consol is $

b. You are concerned that the interest rate may rise to 5 percent. Compute the percentage change in the price of the consol and the percentage change in the interest rate. Compare them.

Instructions: Round your answer for dollar amounts to the nearest penny (2 decimal places ) and answers for percentages to the nearest tenth (1 decimal place).

The new price of the consol would be $

The price of the consol falls by % and the interest rises by %.

c. Your investment horizon is one year. You purchase the consol when the interest rate is 5 percent and sell it a year later, following a rise in the interest rate to 6 percent. What is your holding period return?

Instructions: Round your answer to the nearest tenth (1 decimal place).

Your holding period return is %

Reference no: EM131825339

Questions Cloud

About the elevator pitch : You are staznding at an elevator, waiting. The person you want to pitch your short-term financing proposal to walks up and stands beside you.

What is the value of tim forward contract : What is the value of Tim’s forward contract on 100 shares of stock ABC on March 1st, 2013

What is the ytm if the coupons are paid semi-annual : estimate the Yield-to-Maturity (YTM) of the instrument. What is the YTM if the coupons are paid semi-annual?

Consider retail firm with net profit margin : Consider a retail firm with a net profit margin of 3.58%?, What is the? firm's current? ROE?

What is the price of the consol : If the current interest rate is 3 percent, what is the price of the consol?

Is there an arbitrage opportunity : Assume the dividend rate is 3% and there’s an at-the-money put expiring in 2 years that costs $15. Is there an arbitrage opportunity?

What is local operating margin : What is Local's operating margin? What is Local's net profit margin?

What is rate of return on the incremental investment : What is the rate of return on the incremental investment ?

Calculate the required initial investment by entrepreneur : Fixed assets of $500,000 will be needed to start the venture. calculate the required initial investment by the entrepreneur.

User Account

All Pages