The coupon rate affect the volatility of bond price

Assignment Help Financial Management
Reference no: EM131078229

As the Portfolio Manager of Goodco Fund, you have observed your equity portfolio lose value over the past three months. You have decided to invest in a Bond with a 9 percent coupon and a 5-year maturity currently selling at $1,040 with interest paid annually. Your interest rate outlook is that rates will continue to fall and so you need to know whether this particular bond is suited for your portfolio.

a) Calculate the duration of this bond

b) What are three reasons that duration is important in bond analysis and management?

c) Why does the coupon rate affect the volatility of bond price??

d) You decided to purchase the bond for your portfolio, but now interest rates have risen by 100 basis points, what is the modified duration of the Bond, Explain,

e) Given the current market conditions characterized by record low interest rates, credit concerns, high volatility and uncertainty, was your interest rate outlook suitable and what would be an appropriate

Reference no: EM131078229

Questions Cloud

Stock warrant capitalizes retained earnings : A list of terms and a list of definitions or examples are presented below. Match the list of terms with their appropriate definitions or examples. stock warrant Capitalizes retained earnings. date of record Shares issued minus treasury shares.
Shares of common stock outstanding-earnings per share : Makers Corp. had additions to retained earnings for the year just ended of $313,000. The firm paid out $177,000 in cash dividends, and it has ending total equity of $4.82 million. The company currently has 140,000 shares of common stock outstanding. ..
Sales-total assets and basic earning power : Companies HD and LD have the same tax rate, sales, total assets, and basic earning power. Both companies have positive net incomes. Both firms finance using only debt and common equity and total assets equal total invested capital.
What is the inventory turnover and days sales in inventory : The Green Corporation has ending inventory of $482,700, and cost of goods sold for the year just ended was $3,934,005. What is the inventory turnover? What is the days' sales in inventory?
The coupon rate affect the volatility of bond price : As the Portfolio Manager of Goodco Fund, you have observed your equity portfolio lose value over the past three months. Calculate the duration of this bond. What are three reasons that duration is important in bond analysis and management? Why does t..
Earnings that are high quality would : Earnings that are high quality would
Regarding a high quality balance sheet : All of the following are true regarding a high quality balance sheet except:
Stock pool with the announcement date : What are the Earnings Surprises for the stock POOL with the announcement date of October 22, 2015? Also how many forecasts were there of the EPS for the stock POOL corp. and what was each forecast and the average for it?
Invested in the risky asset and the risk-free asset : You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate ofretum of 0.05. What percentages of your money must be invested in the risky asset and the risk-free asset, respective..

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is your low target stock price over the next year

If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock p..

  Assume interest payments are semi-annual

Compute the price of a 3.8 percent coupon bond with 15 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semi-annual.) Is this a discount or premium bond? Need formula and step by step

  What is the yield to call for these bonds

Atlantis Fisheries issues zero coupon bonds on the market at a price of $421 per bond. These are callable in 7 years at a call price of $640. Using semi annual compounding, what is the yield to call for these bonds?

  Additional taxable income-income taxes and the net income

The R&D of the Advanced Electronics, Inc. (AE) designed a product commissioned by the military, but with applications in commercial markets as well. To manufacture and market the product AE needs to build new manufacturing facilities, and will need a..

  About the valuation-options

The following information refers to six-month call option on the stock of XYZ, Inc. What is the intrinsic value of the option? What is the option's time premium at this price?

  Several advisors to the secretary of the treasury

As one of several advisors to the U.S. Secretary of the Treasury, you have been asked to submit a memo in connection with the average maturity of the obligations of the federal government. The basic premise is that the average maturity is far too sho..

  To evaluate the performance of her portfolio

Susan has 40% of her portfolio invested in a mutual fund to track the S&P 500 and 40% in a mutual fund to track the Dow Jones Industrial Average (DJIA) and 20% in government securities. To evaluate the performance of her portfolio, Susan’s best bench..

  What is the profitability index given a required return

Assume a project has cash flows of -$51,300, $18,200, $37,300, and $14,300 for years 0 to 3, respectively. What is the profitability index given a required return of 12.5 percent?

  Combine all expected impacts to develop an overall forecast

The United Kingdom is expected to impose a small tariff on goods imported from Country K. Combine all expected impacts to develop an overall forecast.

  Constructed with two risky securities

You are considering investing $1,500 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 4..

  You have been hired in the finance department at a large

you have been hired in the finance department at a large metropolitan for-profit hospital. your duties are very

  Which deal is cheaper

A car company is offering a choice of deals. You can receive $2,000 cash back on the purchase or a 2.6 percent APR, 3-year loan. The price of the car is $22,000 and you could obtain a 3-year loan from your credit union, at 6.6 percent APR. Which deal..

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