Face value coupon bond with a two-year maturity

Assignment Help Financial Management
Reference no: EM131052916

Which has a longer Macaulay’s duration: a $1 million face value zero coupon bond with a two-year maturity and a yield of 6 percent, or a $1 million face value coupon bond with a two-year maturity that pays 6 percent coupon interest? Explain your reasoning.

Reference no: EM131052916

Questions Cloud

Construct bar chart of each distribution of rates of return : Assessing return and risk Swift Manufacturing must choose between two asset purchases. The annual rate of return and the related probabilities given in the following table summarize the firm's analysis to this point. Construct a bar chart of each dis..
Investment in net operating working capital : Talbot Industries is considerinng launching a new product. The new manufaturing equipment will cost $17 millioon., and production and sales will rquire an initial $5 million investment in net operating working capital. What is the initial investment ..
Risk-averse-indifferent to risk-risk-seeking : Typically investors and corporate managers require greater return when risk increases. This is called being: risk-averse. indifferent to risk. risk-seeking. investment grade.
Balance sheet showed retained earnings : Mints Entertainment, Inc., had Net income of $170,000 and paid dividens of $.25 per share on its 100,000 shares of ourstanding stocks this year. At the end of the year its balance sheet showed retained earnings of $250,000. What was Mints' retained e..
Face value coupon bond with a two-year maturity : Which has a longer Macaulay’s duration: a $1 million face value zero coupon bond with a two-year maturity and a yield of 6 percent, or a $1 million face value coupon bond with a two-year maturity that pays 6 percent coupon interest? Explain your reas..
What is the implied required rate of return : Suppose a stock pays 2.5 next quarter, then 2.5625, 2.6265625, and 2.6922265625 followed by steady growth of 2.75% per quarter. If the market price of the stock is 563.63384765625 what is the implied required rate of return?
Firms business operations mirror movements in the economy : Suppose a firm’s business operations mirror movements in the economy as a whole very closely—that is, the firm’s asset beta is 1. Find the equity beta for this firm for debt–equity ratios of 0, 1.7, 6.3, and 26.
Discounted payback period if the required rate of return : A project has an initial cost of $16,500 and produces cash inflows of $5,400, $6,200, and $8,700 over the next three years, respectively. What is the discounted payback period if the required rate of return is 15 percent
Find the immediate next prime number : Find the immediate next prime number.

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the financing cost of these bonds

New Hampshire Corp. has decided to issue three-year bonds denominated in 5,000,000 Russian rubles at par. The bonds have a coupon rate of 17%. If the ruble is expected to appreciate from its current level of $.03 to $.032, $.034, and $.035 in years 1..

  What is the percentage change in the price of each bond

Laurel, Inc., and Hardy Corp. both have 9 percent coupon bonds outstanding, with semiannual interest payments, and both are priced at par value. The Laurel, Inc., bond has five years to maturity, whereas the Hardy Corp. bond has 18 years to maturity...

  Manufacturer of high- performance motorcycles

You head up the interdepartmental design review team for a manufacturer of high- performance motorcycles, and things are not going well at the moment. The design engineers and marketing strategists keep arguing about which should be a higher priority..

  Appropriate discount rate-claim to these cash flows

You are expecting to receive $300 at the end of each year in years 3, 4, and 5, and then 500 each year at the end of each year in years 10 through 25, inclusive. If the appropriate discount rate is 6.5 percent, for how much would you be able to sell ..

  Designated the revocable beneficiary

John purchases a life insurance policy on the life of Mary. John is the owner, and Bill is designated the revocable beneficiary. Under these circumstances, which of the following statements is correct?

  About the finance charge

Samir purchased a car for $40,000. He made a down payment of $18,000 and paid $694.47 monthly for 3 years. Find the APR from the table below. Finance charge per $100 of amount financed

  Futures contract on treasury bonds

Boyd Company sold a futures contract (one) on Treasury bonds that specified a price of 93-00. When the position was closed out, the price of the Treasury bond futures contract was 94-20. Did interest rates increase or decrease? How do you know? What ..

  The two principal agencies that regulate the export of goods

The two principal agencies that regulate the export of goods from the U.S. are:

  What is the annual interest rate on a two-year loan

Unbiased Expectations Theory Suppose we observe the following rates: the interest rate for the next year is 6% and the one-year interest rate expected one year from now is 9%. What is the annual interest rate on a two-year loan?

  Weight any assumed conversion of stock options

At January1,2013 Myco Corporation had outstanding the following securities: $1,000,000, 5% cumulative convertible preferred shares,$50 par; each share is convertible into 2 shares of common stock. 7% convertible bonds, $2,000,000 face value issued at..

  What is the percentage change in price of bond

Both bond A and bond B have 10 percent coupons and are priced at par value. Bond A has 10 years to maturity, while bond B has 20 years to maturity. a. If interest rates suddenly rise by 1 percent, what is the percentage change in price of bond A and ..

  Real rate of return on that investment will be

Investors are purchasing 1-year US treasury bills (IOUs from Uncle Sam that will come due in one year) that have a nominal expected rate of return of about 2%. If inflation over the next 12 months is 5% then the real rate of return on that investment..

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