What is the modified duration

Assignment Help Financial Management
Reference no: EM131340598

What is the Macaulay duration of a 7 percent coupon bond with five years to maturity and a current price of $1,025.30? What is the modified duration? Suppose the yield on the bond suddenly increases by 2 percent. Use duration to estimate the new price of the bond. Compare your answer to the new bond price calculated from the usual bond pricing formula. What do your results tell you about the accuracy of duration?

Reference no: EM131340598

Questions Cloud

Book value of equity is equal to market value of equity : Your company doesn't face any taxes and has $251 million in assets, currently financed entirely with equity. Equity is worth $8.1 per share, and book value of equity is equal to market value of equity.
Develop a comparison of application of manufacturing : Analyze manufacturing overhead. Develop a comparison of application of manufacturing overhead using a traditional and an ABC approach. Recommend a course of action on how to apply manufacturing overhead.  Develop scattergraphs, simple regression outp..
Find the maximum frequency shift occurring : Find the maximum frequency shift occurring because of the SPM-induced chirp imposed on a Gaussian pulse of 20-ps width (FWHM) and 5-mW peak power after it has propagated 100 km. Use the fiber parameters of the preceding problem but assume α = 0.
Environmental management system : You are asked to explain whether or not your organization (industrial manufacturing of furniture) should pursue ISO 14001 certification for its environmental management system. Provide a summary of your recommendation, along with supporting detail..
What is the modified duration : What is the Macaulay duration of a 7 percent coupon bond with five years to maturity and a current price of $1,025.30? What is the modified duration? Suppose the yield on the bond suddenly increases by 2 percent. Use duration to estimate the new pric..
Important metrics for operations managers : Develop a listing of what you believe are the most important metrics for operations managers. (Hint: Be sure to consider the triple bottom line.) Howdoes each metric support the overall financial performance of the organization?
Plastic caps from the front axle and discards : Pat removes the plastic caps from the front axle and discards them, then places the metal capnut on one end of the axle and taps it into place with a hammer, which takes about two minutes, on average. He then slides the uncapped end of the axle th..
Discuss the relationships between rcra cercla sara and epcra : Discuss the relationships between RCRA, CERCLA, SARA, and EPCRA. Why do you think there are so many different laws governing hazardous materials and hazardous waste?
What is new degree of operating leverage : A proposed project has fixed costs of $39,000 per year. The operating cash flow at 6,000 units is $68,000. What is the new degree of operating leverage?

Reviews

Write a Review

Financial Management Questions & Answers

  Yield to maturity of bond-what is the dollar price of bond

Yan Yan Corp. has a $3,000 par value bond outstanding with a coupon rate of 5.6 percent paid semiannually and 19 years to maturity. The yield to maturity of the bond is 6.4 percent. What is the dollar price of the bond?

  Depends on the amount of each type of coal burned

Excel Assignment: What and Where Decisions The Big U operates a coal-fired power plant that burns 4,300 tons of coal per year. Coals from four regions of the country can be burned in the plant. The amount of pollution produced depends on the amount o..

  What is the estimated annual operating cash flow

A company is considering a 5-year project to open a new product line. A new machine with an installed cost of $110,000 would be required to manufacture their new product, which is estimated to produce sales of $80,000 in new revenues each year. If st..

  What is the present equivalent of the overhaul expenses

Major overhaul expenses of $4,000 each are anticipated for a large piece of earthmoving equipment. The expenses will occur at EOY two and will continue every three years thereafter up to and including year 14. The interest rate is 9% per year. What i..

  How do market values affect the goal of financial managers

How do book values and market values affect the goal of financial managers? How will a firm determine if its level of liquidity is appropriate?

  Method of financing maximizes the per-share stock price

Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. Which method of financing maximizes the per-share stock..

  Pet store business-what is the beta of assets

Katy's Kitten Emporium (KKE) is a thriving pet store business. You would like to understand the market risk of the KKE and are looking to find its Beta of the Assets. KKE's Beta of Equity is 1.7, the beta of debt is 0.2, and the tax rate is 29%. If K..

  Automatic feature in word automatically corrects typos

The first time you save a document, which dialog box appears? Which automatic feature in Word automatically corrects typos, minor spelling errors, and capitalization as you type? What happens when you click the Zoom level button? Which button is not ..

  What is the discounted payback period

A project has an initial cost of 40000, expected cash inflows of 9000 per year for 7 years and a cost of capital of 11%. - What is the discounted payback period?

  Discuss the importance of analyzing competition

Discuss the importance of analyzing competition within an industry to better appeal to potential candidates. How can an organization use incentives to ensure it appeals to the employees it wants to hire?

  What was your dollar return on this investment

You purchased 270 shares of a particular stock at the beginning of the year at a price of $75.33. The stock paid a dividend of $.95 per share, and the stock price at the end of the year was $81.84. What was your dollar return on this investment?

  Classic retirement problem

This is a classic retirement problem. A time line will help in solving it. Your friend is celebrating her 40th birthday today and wants to start saving for her anticipated retirement at age 65. What amount must she deposit annually now to be able to ..

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