Coupon bond with face value-calculate its price

Assignment Help Financial Management
Reference no: EM131597233

There is a coupon bond with a face value of $1000 and a coupon rate of 5%. Its yield to maturity is 2% and its maturity is five years away.

a) Calculate its price.

b) The yield to maturity is now 4%. Calculate the new price.

c) Name three things on the demand side and three things on the supply side that could have caused this change in the yield. Explain each reason briefly.

d) Assume that the change is driven by the demand side. Draw a diagram of the bond market and show how the demand curve shifts. Label the initial and new equilibria as A and B.

e) Assume that the change is driven by the supply side. Draw a diagram of the bond market and show how the supply curve shifts. Label the initial and new equilibria as A and B.

f) You purchased the bond at its original price, held it for one year, received a coupon, and sold it at the new price. What is the return you received?

Reference no: EM131597233

Questions Cloud

Differences between bond valuation and stock valuation : Please explain the differences between bond valuation and stock valuation. What affect should changes in the dividend payout ratio have on the price of a stock?
What is the yield to maturity on these bonds : What is the yield to maturity on these bonds?
How much total interest is earned on interest : Interest-on-Interest Consider a $2,500 deposit earning 7 percent interest per year for 4 years. How much total interest is earned on interest
The yield to maturity on three-year treasury notes : Suppose that the yield to maturity on three-year Treasury notes is 1.3%. Calculate the price of the two-year note and its return from year 0 to year 1.
Coupon bond with face value-calculate its price : There is a coupon bond with a face value of $1000 and a coupon rate of 5%. Calculate its price.
Discuss the impact of state regulation on insurance premiums : Please discuss the impact of State Regulation on insurance premiums.
Supreme court case that deals with a constitutional issue : Find a Supreme Court case that deals with a constitutional issue. Briefly describe the issue. Do you agree with the Court’s decision
What is the bond price : The market requires an interest rate of 9% on these bonds, what is the bond's price? Assume that this bond is non-callable.
Terms of limited liability companies : What are their options with respect to the management of their form in terms of Limited Liability Companies?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

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

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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