What will be the yield on the bond

Assignment Help Accounting Basics
Reference no: EM133062809

Question - An analyst made the following assessments:

Inflation is expected to be 1% this year, 2% next year, 3%, 4%, 5% on the next succeeding years, and then for the next succeeding years it will be constant throughout at a rate of 7%.

The real risk-free rate is expected to remain at 4% for the next 15 years.

The maturity risk premium is 0.1%(t), where t = the maturity of the bond in years.

A 10-year corporate bond currently yields 15%. Assume that the above assessments are true, what will be the yield on the bond, one year from now assuming that the bond's default and liquidity premium is the same?

Reference no: EM133062809

Questions Cloud

Indicate the type of fund : If you think the fund should be a fiduciary fund, then indicate the type of fund: if a governmental or proprietary fund, then so state
Confidence interval estimate of the population : Provide a 95% confidence interval estimate of the population variance of stock returns.
Primary source of health care in the united states : What is the main effect on the supply owner in terms of insurance premiums, tax subsidies, and mandated benefits?
Why are financial records important : 1. Why are financial records important? How does keeping organized financial records contribute to successful money management?
What will be the yield on the bond : A 10-year corporate bond currently yields 15%. Assume that the above assessments are true, what will be the yield on the bond, one year from now
Discuss the economic impact of covid-19 : 1. Early last year Fijian Government closed its borders. Curfew hours and containment zones were introduced to stop the spread of the Covid 19 disease.
Economic development of recipient countries : Is giving foreign aid beneficial or detrimental to economic development of recipient countries? Why or why not. 200-300 words
How much does david need to borrow : David obtained a fully amortizing loan 8 years ago for $12,0000 at 8% for 30 years. How much does David need to borrow
Pricing decisions by the firm to maximize profit : How does the elastic or inelastic demand influence pricing decisions by the firm to maximize profit?

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

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