Determining maximum price on bonds

Assignment Help Business Management
Reference no: EM1319429

Grandpa Russ thinks he needs a fixed income for the next 10 years. He currently has $10,000 in CDs, which are maturing at the end of this month. The CDs can be renewed for one year at 4.5 percent. Russ calls his broker, Ben Seller, and learns that this $10,000 can be put to better use by purchasing debentures issued by Grab-n-Run, Inc. These bonds are 10-year bonds with a coupon rate of 8 percent, which is paid semi-annually. The current market interest rate is 6 percent for bonds of similar nature. The broker tells Grandpa Russ that he may buy each bond for $1,400. Grandpa knows that he must pay a premium, but he believes that a $400 premium is too high. 

A. What is the maximum price you should tell Grandpa to pay for each bond?

B. Compare the risk of the CD with the risk of the bond.

C. What else would you advise Grandpa with regard to this type of investment?

Reference no: EM1319429

Questions Cloud

Perform computations & write answer in scientific notation : Perform the computations and write your answer in scientific notation.
Mostly likely cause the demand for miller beer : That of the following would mostly likely cause the Demand for miller beer to reduce.
Coefficient of determination and correlation : What does the coefficient of determination tell you about the variation in attendance and the variation in the number of exhibitors?
Metric conversion program : Write down a javascript which will assist user along with the metric conversions. Your program must enable the user to state the names of units as strings.
Determining maximum price on bonds : Grandpa Russ thinks he needs a fixed income for the next 10 years. He currently has $10,000 in CDs, which are maturing at the end of this month.
Solving questions using steps of hypothesis testing : Is your sample of MSU students significantly different from the population of MSU students in terms of the number of classes they take per semester (use alpha level .05)? To answer this question, follow all of your steps for hypothesis testing.
Probability based on rolling two fair dice : What is the probability of getting a number less than 5 on both?
Transmitting image through raster scan : If we were to transmit this image utilizing the raster scan order, after 15 seconds how many rows of image will the user have received? To what fraction of the image does this correspond?
Rationale and challenges related to sourcing : Describe the supply chain necessary for a tailgate for 20 friends before a big game. Discuss the rationale and challenges related to sourcing from low-cost countries.

Reviews

Write a Review

Business Management Questions & Answers

  Caselet on michael porter’s value chain management

The assignment in management is a two part assignment dealing 1.Theory of function of management. 2. Operations and Controlling.

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. Due to increase in the preference for light beer drinkers, Chris Prangel wants to introduce light beer version in Mountain Man. An analysis into the la..

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. An analysis into the launch of Mountain Man Light over the present Mountain Man Lager.

  Analysis of the case using the doing ethics technique

Analysis of the case using the Doing Ethics Technique (DET). Analysis of the ethical issue(s) from the perspective of an ICT professional, using the ACS Code of  Conduct and properly relating clauses from the ACS Code of Conduct to the ethical issue.

  Affiliations and partnerships

Affiliations and partnerships are frequently used to reach a larger local audience? Which options stand to avail for the Hotel manager and what problems do these pose.

  Innovation-friendly regulations

What influence (if any) can organizations exercise to encourage ‘innovation-friendly' regulations?

  Effect of regional and corporate cultural issues

Present your findings as a group powerpoint with an audio file. In addition individually write up your own conclusions as to the effects of regional cultural issues on the corporate organisational culture of this multinational company as it conducts ..

  Structure of business plan

This assignment shows a structure of business plan. The task is to write a business plane about a Diet Shop.

  Identify the purposes of different types of organisations

Identify the purposes of different types of organisations.

  Entrepreneur case study for analysis

Entrepreneur Case Study for Analysis. Analyze Robin Wolaner's suitability to be an entrepreneur

  Forecasting and business analysis

This problem requires you to apply your cross-sectional analysis skills to a real cross-sectional data set with the goal of answering a specific research question.

  Educational instructional leadership

Prepare a major handout on the key principles of instructional leadership

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