Inverse relationship between bond prices and yields

Assignment Help Financial Management

Reference no: EM131838129

Bonds

There is an inverse relationship between bond prices and yields. This inverse relationship will be demonstrated by calculating bond prices to show that interest rates move inversely: if yields rise, then bond prices fall. Bonds will be sold either at a premium or a discount. With this in mind respond to the following question.

You currently own a 30 year Treasury Bond paying a 4% annual coupon rate. The market interest rates for like securities rose to 5%. Would your bond sell for a premium or a discount? Why?

What would the market value of your bond be? Prove your answer by showing your work, the appropriate factors, or the factors that would be used for the fx calculator.

Reference no: EM131838129

Questions Cloud

The risk premium on stock may be zero : Professor Siegel is correct that stocks are less risky than bonds, then the risk premium on stock may be zero.

What is the normal force on the box due to the wall : A box slides down a vertical wall. What is the normal force on the box due to the wall? [ gravity?]

Develop a powerpoint presentation for an upcoming training : You have been asked by your supervisor to develop a PowerPoint presentation for an upcoming training on the following topics.

Create a research topic for your traditional research : Create a research topic for your traditional research. Focus on all attributes that make good topic and remember to narrow down your topic to particular group.

Inverse relationship between bond prices and yields : There is an inverse relationship between bond prices and yields. What would the market value of your bond be?

What is the thickness of the plate : A flat circular plate of copper has a radius of 0.165 m and a mass of 75 kg.

Produce an individual report based on a given hrm case : Examples of previous coursework discussed in seminars, as well as extracts of coursework on Moodle from different grade boundaries where available.

What is the average acceleration of the runner : Starting from rest in the starting blocks, in a time of 3 seconds a runner accelerates to a velocity of 10 m/s. What is the average acceleration of the runner?

What are the factors that increase the client susceptibility : What are the factors that increase the client's susceptibility to acquire the pneumonia infection? What ways to decrease risks for acquiring future infections

User Account

All Pages