Purchasing treasury bonds

Assignment Help Finance Basics
Reference no: EM131214030

An investor was considering purchasing Treasury bonds. Five-year bonds had a 3% yield and 2-year bonds had 2% yield. The investor chose the 5-year bond at a par price for a 3% yield. Subsequently, even though market interest rates remained constant, the investor's bonds kept increasing in price over the next three years. When there was 2 years left to maturity, why was the price of the bond above par?

Reference no: EM131214030

Questions Cloud

Describe the profit maximizing output for the firm : Describe the profit maximizing (or loss minimizing) output for this firm. Explain why or why not there is an economic profit? Explain why a firm in pure competition is considered to be a "price taker."
What if we roll more than 2 dice : Suppose we roll three dice and observe the sum. What is the most likely sum and what is the probability of its occurrence?
Create a formal code of ethics for it : Suppose you have just joined a large financial services company as the head of IT and are asked to create a formal code of ethics for IT. What steps would you take to research this, and what resources would you consider?
Sign of coming recession : An inverted yield curve occurs when short-term interest rates are higher than long-term rates. It is often said that an inverted yield curve is a sign of coming recession. Why do you think the view makes sense? Why not?
Purchasing treasury bonds : An investor was considering purchasing Treasury bonds. Five-year bonds had a 3% yield and 2-year bonds had 2% yield. The investor chose the 5-year bond at a par price for a 3% yield.
How long will it take to perform a full backup of the data : Given a tape backup device based on LTO-2 technology (200 GB per tape and 24 megabytes per second (MB/s) transfer rate), how long will it take to perform a full backup of the data?
What is probability that at least one of diodes is defective : If two diodes are selected at random without replacement, what is the probability that at least one of these diodes is defective?
Define ways that preschool policy on compassionate treatment : You have been learning about key areas of growth and development related to prosocial behaviors. Describe three ways that a preschool policy on compassionate treatment and care of animals that visit or live in classrooms would foster this growth a..
What are the functions of working capital : 1. What are the functions of working capital? 2. What is concentration banking?

Reviews

Write a Review

Finance Basics Questions & Answers

  Percentage change in the price of bonds laurel

Whereas the Hardy Corp. bond has 15 years to maturity. If interest rates suddenly fall by 2 percent, the percentage change in the price of Bonds Laurel, Inc

  However government tried hard to stimulate the investment

interest rate varied in different maturities of bond because whether you have a good yield is depending on the type of

  Why is the market economy not a pareto optimum

In the model of banks as providers of liquidity insurance, I examined four cases. Autarky, a market economy with borrowing and lending, the Pareto optimum and how banks can achieve the Pareto optimum.

  A corporation issued 350 shares of its 10 par value common

a corporation issued 350 shares of its 10 par value common stock in payment of a 3970 charge from its accountant for

  What is the difference between a genotype and a phenotype

What is the difference between a genotype and a phenotype?

  Apply quantitative techniques to complex financial problems

Analyze financial statements and qualitative data of profit maximizing firms for corporate decision-making - Apply quantitative techniques to complex financial problems.

  What is the horizonn value at 2012

Current and projected free cash flows for Radell global operations are shown below. growth is expected to be constant after 2012, and the weighted average cost of capital is 11% what is the horizonn (continuing) value at 2012?

  How large should sunrises equal annual end-of-year deposits

sunrise industries wishes to accumulate funds to provide a retirement annuity for its vice president of research jill

  What are some of the risks and cost considerations

What are some of the risks and cost considerations associated with each of these alternative financing strategies?

  A real estate development company

A real estate development company is considering building a new office building in downtown. Above 20,000 square feet, the company's managers believe they can generate approximately $600,000 in additional lease payments for every additional 1,000 ..

  Northern pacific external equity

Northern Pacific Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 40 percent with the  $10 million investment in plant and machin..

  Hon is the honeywell international

HON is the Honeywell International.  The tutor must include all the tabels that he used to do the calculations. Just include them at the end of the paper and he should prefer to them in side the text when answering the questions

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