Percentage change in the price of bonds

Assignment Help Financial Management
Reference no: EM13877724

Bond J has a coupon rate of 4.3 percent. Bond S has a coupon rate of 14.3 percent. Both bonds have eleven years to maturity, make semi annual payments, and have a YTM of 9.6 percent.

Requirement 1:

If interest rates suddenly rise by 3 percent, what is the percentage change in the price of these bonds?

Reference no: EM13877724

Questions Cloud

Relation between corporate bonds expected return : What is the relation between a corporate bond’s expected return and the yield to maturity? In your answer, define default risk and explain how these rates incorporate default risk.
The interest is discounted monthly : Company XYZ purchased some machinery and gave a five-year note with a maturity value of $20,000. The discount rate is 8% annually and the interest is discounted monthly. How much did the company borrow?
Identify positive-npv trades be sceptical : Why should investors who identify positive-NPV trades be sceptical about their findings if they don’t inside use inside information or a competitive advantage?
Two mutually exclusive extraction projects : An oil drilling company must choose between two mutually exclusive extraction projects, and each costs $11.8 million. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t = 1 of $14.16 million. Does this imply that the W..
Percentage change in the price of bonds : Bond J has a coupon rate of 4.3 percent. Bond S has a coupon rate of 14.3 percent. Both bonds have eleven years to maturity, make semi annual payments, and have a YTM of 9.6 percent. If interest rates suddenly rise by 3 percent, what is the percentag..
What is the percentage change in the price of bonds : Both Bond Bill and Bond Ted have 12.4 percent coupons, make semi annual payments, and are priced at par value. Bond Bill has 5 years to maturity, whereas Bond Ted has 22 years to maturity. If interest rates suddenly rise by 3 percent, what is the per..
What are the prices of these bonds today : Bond X is a premium bond making annual payments. The bond has a coupon rate of 8.6 percent, a YTM of 6.6 percent, and has 19 years to maturity. Bond Y is a discount bond making annual payments. This bond has a coupon rate of 6.6 percent, a YTM of 8.6..
Current security prices reflect public-private information : Current security prices reflect all public and private information. This statement describes what form of the Efficient Market Hypothesis.
It makes concrete ideas more figurative : When used as evidence, what does an effective example do? It makes abstractions less didactic. It makes concrete ideas more figurative. It makes concrete ideas more abstract

Reviews

Write a Review

Financial Management Questions & Answers

  Which type of insurance company generally takes on the great

Which type of insurance company generally takes on the greater risks: a life insurance company or a property and casualty insurance company?

  Expected rate of return of both stocks using dividend growth

What are the required rates of returns on both stocks using the CAPM model? What are the expected rates of return of both stocks using the dividend growth model. Which stock would you recommend to purchase or sell? Why?

  Calculate the value of share of stock

Using the P/E ratio approach to valuation, calculate the value of a share of stock.

  Find the sustainable and internal growth rates for firm

Find the sustainable and internal growth rates for a firm with the following ratios: asset turnover = 2.40; profit margin = 5%; payout ratio = 25%; equity/assets = .20. (Do not round intermediate calculations. Enter your answers as a percent rounded ..

  Before the recapitalization

Tapley Inc. currently has total capital equal to $6 million, has zero debt, is in the 40% federal-plus-state tax bracket, has a net income of $2 million, and pays out 40% of its earnings as dividends. What is the stock's current price per share (befo..

  Sales and earnings for emovies are expected to grow rapidly

Sales and earnings for eMovies are expected to grow rapidly over the next 5 years. Although the firm is currently losing money, eMovies expects to begin paying out 60% of earnings during the fiscal year ending in June of 20/20, with initial sharehold..

  Preparation of budgets and working capital management

Evaluate the CVP technique and explain the limitations of its use in the context of both the different interpretations of the CVP technique offered by the economist's model of CVP and other limitations.

  What is the future value-assume annual compounding

What is the future value of $1,200 a year at the end of each year for 40 years at 8 percent interest? Assume annual compounding.

  Determine the percentage of total payment spent

Determine the Percentage of Total Payment Spent

  What is the value of this obligation

Suppose that you have an obligation to make payments of $5 million in five years and $5 million in ten years. The yield on a five-year zero coupon bond is 5% and the yield on a ten-year zero coupon bond is 7%. What is the value of this obligation?

  Show the cash flows on deal

Tony borrowed $10,000 from his sister at 8%, simple interest, and repaid the entire amount after 5 years. Show the cash flows on this deal.

  Increased production capacity by acquiring more machines

During the year a company increased the production capacity by acquiring more machines. Compute company's capital expenditures during the year.

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