Find the modified duration-what is the exact change in price

Assignment Help Financial Management
Reference no: EM13804425

Consider a 30-year corporate bond paying 9 percent semi-annual coupon. The current yield to maturity is 11 percent.

a. Find the modified duration.

b. Refer to part a. If the interest changes by 25 basis points, what is the exact change in price?

c. Refer to part b. If the interest changes by 25 basis points, what is the approximate change in price?

Reference no: EM13804425

Questions Cloud

Create a weighted ranking : Create a weighted ranking according to your own evaluation of the features and specifications of each software package
Shares of common stock outstanding : Roth Corp. wants to raise $4.4 million via a rights offering. The company currently has 540,000 shares of common stock outstanding that sell for $42 per share. Its underwriter has set a subscription price of $30 per share and will charge the company ..
The growth rate for the firms common stock : The growth rate for the firm’s common stock is 7%. The firm’s preferred stock is paying an annual dividend of five dollars. What is the preferred stock price if the required rate of return is 8%.
What is the rate of return-define the goal or objective : An investor has invested $250,000 in a new rental property. Her estimated annual costas are $6,000 and annual revenues are $20,000. What rate of return per year will the investor make over a 30-year period ignoring the salvage value? If the property ..
Find the modified duration-what is the exact change in price : Consider a 30-year corporate bond paying 9 percent semi-annual coupon. The current yield to maturity is 11 percent. Find the modified duration. Refer to part a. If the interest changes by 25 basis points, what is the exact change in price?
What will be his after-tax yield to maturity : An investor purchases a 30-year U.S. government bond for $840. The bonds coupon rate is 10 percent and, it still had twelve years remaining until maturity. If the investor holds the bond until it matures and collects the $1000 par value from the Trea..
What will be the new level of non-borrowed reserves : Suppose the banking systems non-borrowed reserves total $58.3 billion with total legal reserves standing at $65.2 billion. What must borrowed reserves be? This morning the Federal Reserve decided to undertake the purchase of $700 million in governmen..
What do the proportions of debt and equity add to : A firm’s WACC is 13%, its required return on equity is 17%, and its after-tax cost of debt is 6%. What proportion of the firm’s capital structure is debt, and what proportion is equity? (Hint: what do the proportions of debt and equity add to?)
What is the size of the transaction deposit multiplier : Suppose that the public wishes to hold $0.35 in pocket money (currency and coin) and $0.25 in time and savings deposits. Suppose that banks wish to hold $0.20 for each new dollar of transaction money received. What is the size of the transaction depo..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Determine the growth rate of the company

Determine the growth rate of the company for each of next three years and Suppose after one year, everything else will be unchanged but the required rate on equity will decrease to 14%. What would be your holding period return for the year?

  Lender actually charging on the repayment agreement

Bill Farmer has had some financial problems and cannot pay the $200,000 loan that is due next week (i.e. now). Bill's lender agrees to accept 5 annual payments of $46,000 each for the next 5 years instead, with the first payment due one year from now..

  What nominal annual interest rate will you be earning

You agree to make 24 deposits of $500 at the beginning of each month into a bank account. At the end of the 24th month, you will have $13,200 in your account. If the bank compounds interest monthly, what nominal annual interest rate will you be earni..

  Statements concerning junk bonds

Which of the following statements concerning junk bonds is most correct?

  What should the value of equity be

Suppose you borrow $50000 when financing a coffee shop which is valued at $75000. You expect to generate a cash flow so $84000 if demand is as expected. The cost of debt is 4%. What should the value of equity be?

  Bond and company pays a semi-annual interest

When originally issued, the bonds were sold for $960 per bond; today their current market price is $1,065 per bond and company pays a semi-annual interest of $45 per bond. If an investor purchases a bond 10 years ago when the bond was first issued an..

  What is the present equivalent of the overhaul expenses

Major overhaul expenses of $4,000 each are anticipated for a large piece of earthmoving equipment. The expenses will occur at EOY two and will continue every three years thereafter up to and including year 14. The interest rate is 9% per year. What i..

  Comprehensive major medical health insurance plan

Becky’s comprehensive major medical health insurance plan at work has a deductible of $750. The policy pays 85 percent of any amount above the deductible. While on a hiking trip, Becky contracted a rare bacterial disease. Her medical costs for treatm..

  What are the nal and irr of the lease

Interpret each value.b. Assume now that the bank loan would cost 15 percent, but all other facts remain the same. What is the new NAL? The new IRR?

  Relationship between leverage and capital structure

If we incorporate Financial Distress and Bankruptcy Costs and also Taxes, then we have altered the fundamental assumptions of Modigliani and Miller. Explain the relationship between leverage and capital structure under the new assumptions.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  What is average accounting return criterion decision rule

Describe how the average accounting return is usually calculated and describe the information this measure provides about a sequence of cash flows. What is the Average Accounting Return criterion decision rule? What problems associated with using the..

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