How will the expected return on this bond change

Assignment Help Econometrics
Reference no: EM131141909

Imagine a short-term corporate $1,000 bond that promises to pay 8 percent interest over three years. This bond will pay $80 at the end of the first year and the second year, and $1,080 at the end of the third year. After one year, however, the market interest rate has increased to 12 percent. What will the bond be worth to an investor who is not too concerned about risk at that time? If the firm appears likely to go bankrupt, how will the expected return on this bond change?

Reference no: EM131141909

Questions Cloud

Evaluate impact that different types of feedback practices : Discuss what differentiates "good feedback practices" from "bad feedback practices." Evaluate the impact that these different types of feedback practices may have on employees at Matrix.
What is the efficient market theory : What is the efficient market theory? What implications does it have for whether you can beat the market? Does it imply that all stocks must yield the same expected return?
Describe the stated purpose of cryonic suspension : Describe the stated purpose of cryonic suspension to a person with a psychological disorder
Will a risk-averse person buy a ticket in this lottery : What is the expected return to buying a ticket in this lottery? Will a risk-averse person buy a ticket in this lottery?
How will the expected return on this bond change : What will the bond be worth to an investor who is not too concerned about risk at that time? If the firm appears likely to go bankrupt, how will the expected return on this bond change?
Write a paper on diversity and membership issues : Write a paper and addresses all of the assignment- Diversity and Membership Issues - Overview of the Adult in Environmental Context Facing a Challenge.
Determine one factor for each of porter five forces : Examine service categories commonly provided by nursing homes. Determine two specific service categories that you believe are common factors of competition among nursing homes. Justify your response.
How trevino''s perspective fits the efficient market theory : Why would a stranger want to make me a million?" Explain how Trevino's perspective fits the efficient market theory
Examine the economic trends and impact of globalization : Examine the economic trends and impact of globalization in the chosen market and determine which of those emerging factors have potential for disruption that could affect operations.

Reviews

Write a Review

Econometrics Questions & Answers

  Explain this tendency of industrial clusters to break up

Explain this tendency of industrial clusters to break up in terms of the theory of external economies.

  How much cash does tacy take out each time

Solve Tracy's problem of how often to go to the ATM when the nominal interest rate on her bank account is 10 percent, she spends $30 each day, it costs her $.50 each time she uses the ATM, and she thinks that there is a 15 percent chance.

  What is the deadweight loss cause by the insurance policy

suppose that an individuals demand curve for doctor visits per year is given bye the euqation p=100-25q, where q is the number of doctor visists per year and p is the price per visit. suppose also the that marginal cost of each doctor visit is $50..

  What are the sizes of the mpc and mps

Assuming the level of investment is $16 billion and independent of the level of total output, complete the following table and determine the equilibrium levels of output and employment in this private closed economy. What are the sizes of the MPC ..

  What is the supply function of this competitive firm

A perfectly competitive firm has a total cost function TC(Q)=10 million + 5Q + Q2/10,000. Of its total fixed cost of $10 million, $9 million can be avoided if the firm produces an output of zero, but $1 million is completely unavoidable.

  Business cycle theory that combines classical is-lm model

Consider a business cycle theory that combines the classical IS-LM model with the assumption that temporary changes in government purchases are the main source of cyclical fluctuations. How well would this theory explain the observed cyclical beha..

  Explain should the collector pay the consultation fee

Suppose now some appraiser can identify the painting with 90% if its not a counterfeit, and 80% if it is a counterfeit. If the appraiser chargers $500 for consultation, should the collector pay the consultation fee and ask for consultation

  What are the levels of saving and actual investment

What are the levels of saving and actual investment In which direction and by what amount will unplanned investment change as the economy moves from the $410 billion level of GDP to the equilibrium level of real GDP

  What is the value of nominal gdp in 2010

If the annual GDP growth rate is 8 percent in Papaya, by how much will the money supply need to change in 2011?

  Which is an accurate description of the revolution

which is an accurate description of the revolution? A. it never had majority support b. two thirds of the population either opposed it or did nothing to support it c. It became a popular war, maintaining wide spread popular support after 1776 d. A..

  Give a formula for the marginal rate of substitution of y

At any bundle (x,y), find a formula for the marginal utility of x (which we have called MUx) and a formula for the marginal utility of y(MUy) Frieda, a rational consumer can buy an x-commodity and a y-commodity. Her preferences over alternative

  How much purely financial investment took place

Assume that a national restaurant firm called BBQ builds 20 new restaurants at a cost of $1 million per restaurant. It outfits each restaurant with an additional $300,000 of equipment and furnishings. To help partially defray the cost of this expa..

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