What price would be predicted by using duration

Assignment Help Accounting Basics
Reference no: EM133073453

Question - Convexity - A newly issued bond has a maturity of 10 years and pays a 7% coupon rate (with coupon payments coming once annually). The bond sells at par value of $100.

(a) What are the duration, modified duration and dollar duration of the bond? What is its convexity?

(b) Find the actual price of the bond assuming that its YTM immediately increases from 7% to 8%?

(c) What price would be predicted by using duration? What is the prediction error?

(d) What price would be predicted by using duration-with-convexity? What is the prediction error?

Reference no: EM133073453

Questions Cloud

Debating early childhood legislation : It is not uncommon for early childhood professionals to have differing opinions about bills or legislation introduced to support young children and families.
What is the share price of xyz corp : a) What is the share price of XYZ Corp. if it does not undertake the investment?
Value of currency swap for company a : Company A makes annual USD payments of 6% on a notional of USD 2,265,000. Company A receives annual GBP payments of 7% on a notional of GBP 1,500,000.
What is a reasonable estimate the pt hebat tbk : a) What is a reasonable estimate the PT Hebat Tbk could expect from the proceeds of issuing its bonds?
What price would be predicted by using duration : A newly issued bond has a maturity of 10 years and pays a 7% coupon rate. What price would be predicted by using duration
Contribute to rrsp for the current year : At the end of last year, David had unused RRSP contribution room of $2,500. Last year, he had earned income of $80,000 and he was a member of his employer's def
Indicate dollar amounts to reported as current liability : For each item above, indicate the dollar amounts to be reported as a current liability and as a long-term liability, if any
Brainstorm list of of the most serious social problems : Brainstorm list of of the most serious social problems facing the United States today. list them from the most pressing to the least pressing
Investigate new approaches to budget management : Describe two research methods you can use to investigate new approaches to budget management.

Reviews

Write a Review

Accounting Basics Questions & Answers

  In calculating wacc for the cost of debt use the current

in calculating wacc for the cost of debt use the current cost of debt with the assumption that there is no need to

  Determine the taxable income

Determine the taxable income in 2018 and 2019 if the taxpayer is (a) resident citizen (b) domestic corporation

  Historical transitioning and growth of us health care system

As a health administrator, your hospital has tasked you with reporting the general nature of health care administration to visiting stakeholders / shareholders.

  Kate greenway corporation having recently issued a 20

ron stein company recently signed a lease for a new office building for a lease period of 10 years. under the lease

  Find what is the npv of the given project

Suppose a project has a $2,000,000 net investment and net cash flows (NCFs) of $700,000 annually for 7 years. Find what is the NPV of this project?

  How much is taken to profit or loss

How much is taken to profit or loss a result of the foregoing events affecting the equity investments for the year ended December 21, 2020

  Journalize the march transactions

Mar. 2 Rented the three Indiana Jones movies to be shown for the first 3 weeks of March. The film rental was $3,500; $1,500 was paid in cash and $2,000 will be paid on March 10.

  Total asset turnover is calculated by dividing gross profit

total asset turnover is calculated by dividing points 21. gross profit by average total assets2. average total

  Compute the total issue price of the bonds

Haley Co. issued ten-year bonds with a face amount of $4,000,000 and a stated interest rate of 8%. Compute the total issue price of the bonds

  What is the margin of safety in dollars and percentage

The sales manager proposes raising prices by $1 and increasing ad spending by $3.5 million. Demand would fall by 500,000 units. Is the firm more profitable.

  What is the allocation of capital for bea

Bea runs the store, and is provided a $20 salary on top of profits. If partnership income during 20x1 totaled $71 what is the allocation of capital for Bea

  How much gross income does chaya report

How much gross income does Chaya report from these transactions in 2019? Do not round any division. If required, round your final answer)

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd