How the bond price will be expected to adjust across time

Assignment Help Finance Basics

Reference no: EM131928190

Question: 1. Develop a valuation model for the long-term corporate bond with a face value at maturity of $100,000, a maturity of 10 years, a coupon interest rate of 6%, and a market yield of 8%. The coupons are assumed to be paid semi-annually. In your development and presentation, include a time line showing the relevant cash flows along with all of the steps that allow you to generate the value (price of the bond). Please make sure that the equations are readable.

2. Given the problem above, identify how the bond price will be expected to adjust across time as the bond approaches maturity. You should calculate the price after each 2-year period has passed - i.e., after year 2, year 4, year 6, year 8 and year 10. Graph the resulting movement in the price across time using the resulting values. Explain how this movement in the bond price across time is important for the investor.

Reference no: EM131928190

Questions Cloud

What is the firm accounts receivables turnover : What is the firm's accounts receivables turnover? (Give your answer up to two decimal places)

Calculate the expected value of return : Integrativelong-Expected return, standard deviation, and coefficient of variation An asset is currently being considered by Perth Industries.

Explain the advantages of using the XIRR function : Explain the advantages of using the XIRR function rather than the IRR function for calculating a bond's yield to maturity.

Explain in words why the present values would be higher : If the interest rate is 4 percent instead of 6 percent, please explain in words why the present values would be higher.

How the bond price will be expected to adjust across time : Given the problem above, identify how the bond price will be expected to adjust across time as the bond approaches maturity.

What is weekly economic profit : If John's weekly accounting profit is $1,000 per week, what is his weekly economic profit? Was this a good decision for John?

What is the price of a 10 month forward contract to buy : If the spot exchange rate is 1.5 dollars per pound, what is the price of a 10 month forward contract to buy the British pound?

Calculate earnings per share for each level of indebtedness : Calculate earnings per share for each level of indebtedness.Choose the optimal capital structure. Justify your choice.

Create a schedule of cost of goods manufactured : Prepare a schedule of cost of goods sold. Create a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.

User Account

All Pages