Why does the longer-term bond fluctuate more

Reference no: EM131518522

Question: The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S a maturity of 1 year.

a. What will be the value of each of these bonds when the going rate of interest is (1) 5 percent, (2) 8 percent, and (3) 12 percent? Assume that there is only one more interest payment to be made on Bond S.

b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?

Reference no: EM131518522

Questions Cloud

Analyze leadership motivation and ethical values of leader : Analyze the leadership, motivation, and ethical values of the leader interviewed and assess its impact in the ethical performance of the organization.

What is the price of the bonds : Nungesser Corporation has issued bonds that have a 9 percent coupon rate, payable semiannually. The bonds mature in 8 years, have a face value of $1,000.

International management consulting : Kaizer Consulting is an international management consulting firm that specializes in business strategy and serves as a key advisor to the world's.

Research the new york stop and frisk program : Research the New York stop and frisk program. What laws, statutes, or cases are the basis for the program?

Why does the longer-term bond fluctuate more : The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years.

Discuss if the knowledge management is a business process : Discussion- Discuss if the knowledge management is a business process or a technology. Support your idea, Provide example.

Explain the concept of devaluation of a currency : Explain the concept of devaluation of a currency. What effects does this have on the price of a country's imports?

Which ethical theories from your course readings : Which ethical theories from your course readings (such as utilitarianism, the categorical imperative, and so on) best support your ideas and perspectives?

What is the yield to maturity at a current market price : The Heymann Company's bonds have 4 years remaining to maturity. Interest is paid annually; the bonds have a $1,000 par value; and the coupon interest rate.

User Account

All Pages