What is the current yield and capital gains yield on bond

Assignment Help Financial Management

Reference no: EM131991270

Show Excel equations used

Assume that a $1,000 par value bond with a coupon rate of 6.5% (paid semi-annually) has 15 years to maturity.

a. If the current rate of interest on bonds like this is 5%, what will be the price of the bond? What is the price if current interest rates are instead 8%?

b. Assume that you buy the bond described above when interest rates are 5%. Five years later, you decided to sell the bond when current interest rates are still 5%. At what price will the bond be selling? Do the same assuming that you buy the bond when interest rates are 6%, and five years later they are still 6%.

c. Now assume that you purchase the bond in part a above when interest rates are 5%, and five years later interest rates are 9%. What will be the price of the bond?

d. What is the current yield and capital gains yield on this bond in part a if interest rates are 5%?

Reference no: EM131991270

Questions Cloud

Addresses the needs of a multi-generational workforce : Can you speak to (1) talent management strategy that both addresses the needs of a multi-generational workforce and supports an organization

Describe a real-world application for each subspecialties : Describe a "real-world" application for each of the two subspecialties. How could knowledge gained through the pursuit of each subspecialty help.

Are profitable ethical businesses profitable : Are profitable ethical businesses profitable because they are ethical , or are they ethical because it can lead to profits?

Align with the organization strategy : When using the 7 S model to make alignment, why do managers need to make sure all the Ss align with the organization's strategy?

What is the current yield and capital gains yield on bond : What is the current yield and capital gains yield on this bond in part a if interest rates are 5%?

Discuss about the natural disasters : This week we are looking at the stress upon children and their families during natural disasters as well as how trauma impacts children, families.

Publicly traded company that owns porsche dealerships : Szanto Porsche is a publicly traded company that owns Porsche dealerships.

What factors are contributing to this trend : What factors are contributing to this trend? What can be done at the individual, organisational, and public policy level to reduce/eradicate workplace bullying?

Describe what you learned about your organization : Since every organization has unique features, do your best to work at the application of the various components of the building blocks of the canvas.

User Account

All Pages