What will be the percentage change in the price of the bond

Assignment Help Financial Management

Reference no: EM131012778

A Bond pays a 8 percent coupon rate with 10 years to maturity, makes semiannual payments, and has a yield-to-maturity of 6 percent. If market interest rates suddenly rise 1 percent, what will be the percentage change in the price of the bond? Did it increase or decrease? Show your work for the current price, the new price, and the percentage change. Did the price increase or decrease if the market rate rises? Briefly explain why.

Reference no: EM131012778

Questions Cloud

A project will produce cash inflows : A project will produce cash inflows of $2,000 a year for 8 years. There is also a final cash inflow of $10,000 in year 8. The project's initial cost is $12,000. What is the net present value of this project if the required rate of return is 15 percen..

Depeters co is sued for sex discrimination : DePeters Co is sued for sex discrimination on the grounds that too few women are hired because fewer women than men achieve passing scores on a required manual dexterity and physical strength test. DePeters Co. offers in its defense that even th..

In the accumulation phase of the investor life cycle : In the accumulation phase of the investor life cycle:

Which investment is preferred and why : You have $10,000 to invest for 5 years and find the following information. Calculate the future value for each option. There are no payments, just a total amount received at maturity. Show your formulas or the inputs you use for your calculations. a)..

What will be the percentage change in the price of the bond : A Bond pays a 8 percent coupon rate with 10 years to maturity, makes semiannual payments, and has a yield-to-maturity of 6 percent. If market interest rates suddenly rise 1 percent, what will be the percentage change in the price of the bond? Did it ..

Full time as a pastry chef for many years : Pease read the following case study and complete the 3 assigned tasks Ming has been working full time as a pastry chef for many years and is now considering using his accumulated savings to open up his own pastry shop.

Production for an initial investment in equipment : Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6.3 million. The equipment will be depreciated straight line over 6 years to a value of zero, but in fact it can be sold after 6 years fo..

Average annual rate of return : Suppose Albert puts $20,000 into a mutual fund 10 years ago and his investment today is worth $26,000. What is his average annual rate of return (compounded annually). Round your answer to 3 decimal places.

How much was earned in interest on interest : A savings account, which started with a balance of $500, has the following end of year balances: Year 1 = $550; Year 2 = $580; Year 3 = $660; Year 4 = $772; Year 5 = $950. No withdrawals were made over the life of the account, but there was one addit..

User Account

All Pages