User Account

All Pages

Estimate the current price of the bond

Assignment Help Finance Basics
Reference no: EM131318701

Microsoft has a bond outstanding (symbol: MSFT.GB) with a 4.20% coupon rate and a yield to maturity (continuously compounded) of 1.535%. The bond expires in June, 2019, and pays interest semi-annually. Use a face value of $100 for the following. Note: You might f ind it helpful to use a table like we did in class, but you don ' t need to.

 a. Estimate the current price of the bond.

b. Calculate the duration of the bond.

c. Calculate the convexity of the bond.

d. Suppose the yield goes up by 1%. Use your estimates of duration and convexity to estimate the change in price of the bond.

e. Under what circumstance is it sufficient to use only duration instead of both duration and convexity?

Reference no: EM131318701

Questions Cloud

Explain the primary methods of managing credit risk : Identify and explain the primary methods of managing credit risk for derivatives dealers ?- Identify and explain four forms of netting ?
Interpret the given statements about value at risk : Interpret the given statements about Value at Risk so that they would be easily understood by a nontechnical corporate executive:
Explain which economic system you would select : Compare the different economic systems. Explain which economic system you would select. Include least two sources within the body of your work. Format your assignment consistent with APA guidelines.
How many links in the n-cube can fail : Compare the resiliency to failure of n-cube to a fully connected interconnection network. Plot a comparison of reliability as a function of the added number of links for the two topologies.
Estimate the current price of the bond : Microsoft has a bond outstanding (symbol: MSFT.GB) with a 4.20% coupon rate and a yield to maturity (continuously compounded) of 1.535%. The bond expires in June, 2019, and pays interest semi-annually. Use a face value of $100 for the following. N..
Payback period for project : Kathleen Dancewear Co. has bought some new machinery at a cost of $1,250,000. The impact of the new machinery will be felt in the additional annual cash flows of $375,000 over the next five years. What is the payback period for this project? If it..
Explain what makes it the most effective economic system : Explain what makes it the most effective economic system. Identify an example of the system being used in history. Explain what you perceive as the most effective economic system. (Topic: Capitalism)
How does legal system impose risk on a derivatives dealer : Explain how closeout netting reduces the credit risk for two firms engaged in several derivatives contracts ? How does the legal system impose risk on a derivatives dealer?
Are differing viewpoints considered-analyzed and treated : How does a healthy spiritual development affect the likelihood of use/abuse/addiction in the adolescent years? Discuss local news coverage of alcohol or drug-related stories to adolescent use in your area. Give details on the prevalence of addicti..

Reviews

Write a Review

Finance Basics Questions & Answers

  Should firms require higher rates of return on foreign

should firms require higher rates of return on foreign projects than on identical projects located at home?

  Evaluate the financial strengths and weaknesses jaedan

Complete the Mini Case in Chapter 2 of your text. Use formulas to calculate the ratios, clearly label the analysis, and round to one decimal place. You must complete all requirements of the case study.

  What are typical maturities denominations and interest pay

What are typical maturities, denominations, and interest payments of a corporate bond? What mechanisms protect bondholders?

  Describe covenants and requirements

Look up the El Torito company (also Real Mex Restaurants, Inc) S-4 filing on 2004-06-09. - Describe the covenants and requirements to which El Torito is obligated.

  What is the effective annual interest rate of the loan

Carry Trade, Inc., borrows yen when the yen is trading at Y110/US$. If the nominal annual interest rate of the loan is 3% and at the end of the year the yen trades at Y120/US$, what is the effective annual interest rate of the loan?

  Essential activities involved in the initial planning

Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client?

  The american research council of humanity arch had the

the american research council of humanity arch had the following financial events during the current year1. january 12.

  What is the national association of securities dealers

What is the National Association of Securities Dealers Automated Quotation System (NASDAQ)?

  Whats the bonds current yield

The bond pay interest annually, has a par value of $1,000, and a yield to maturity of 10.75%. What's the bonds' current yield?

  What is determination of proportions of various securities

What is the determination of the proportions of various securities within a portfolio referred to as?

  Explain arguments against including international equities

List and briefly explain the arguments against including international equities in an investment portfolio.

  Determine the value of the stock

Given your answers to ( a) and ( b), how are stock prices affected by changes in investor's required rates of return?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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