What would happen to price of the bonds over time

Assignment Help Financial Management

Reference no: EM131969344

Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments. Please show detailed calculations and work.

a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. At what price would the bonds sell?

b. Suppose that, 2 years after the initial offering, the going interest rate had risen to 12%. At what price would the bonds sell?

c. Suppose, as in part a, that interest rates fell to 6% 2 years after the issue date. Suppose further that the interest rate remained at 6% for the next 8 years. What would happen to the price of the bonds over time?

Reference no: EM131969344

Questions Cloud

What is the balance after the first annual payment : What is the balance after the first annual payment on a $260,000 loan for 20 years with a 6% interest rate and a payment of $22,667.98?

Same maturities as the treasury bonds : Now suppose ExxonMobil’s bonds, rated AAA, have the same maturities as the Treasury bonds.

What is the margin on the short position : What is the remaining margin in the account? What is the margin on the short position?

Describe your strategy and quantify the arbitrage profit : Would you invest in Australia or in the United States? Why? Describe your strategy and quantify the arbitrage profit, if any.

What would happen to price of the bonds over time : Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 6%. What would happen to the price of the bonds over time?

Margin in dee account when she first purchases the stock : What is the margin in Dee’s account when she first purchases the stock?

What is the one-year forward rate : What is the one-year forward rate that makes you indifferent between investing in the U.S. and investing in the U.K?

Short-sell-what is your maximum possible loss : What is your maximum possible loss? What happens to the maximum loss if you simultaneously place a stop-buy order at $141.20?

Present value calculation : Present Value Calculation. Calculate the PV of a 2-year annuity paying $10 each time at the discount rate of 10%.

User Account

All Pages