What is the modified duration price

Assignment Help Financial Management
Reference no: EM131915263

What is the Macaulay duration of a 7 percent coupon bond with 5 years to maturity and a current price of $1,025.30? What is the modified duration price?

In the previous problem, 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: EM131915263

Questions Cloud

About relationship between duration and yield to maturity : What is the Macaulay duration now? What does this tell you about the relationship between duration and yield to maturity?
What are the ethical issues faced while enacting quarantine : What are the ethical issues faced while enacting quarantine? Should there be any exceptions to EMTALA in a disaster situation? Why or why not?
What amount is the maximum allowable depreciation : There is an allowable Section 179 limit in the current year of $25,000. What amount is the maximum allowable depreciation
Has logistics outsourcing ever occurred in your company : Have you ever been involved in a decision that takes both transportation and inventory holding costs into account?
What is the modified duration price : What is the Macaulay duration of a 7 percent coupon bond with 5 years to maturity and a current price of $1,025.30? What is the modified duration price?
Was daktronics implementation of lean manufacturing sucess : Manufacturers locate near their resources, while retailers locate near their customers." Does this statement make sense in your industry.
State the relevant moral consideration pertinent to question : State the relevant moral considerations pertinent to this question. Critically examine and evaluate the position of at least one of the authors.
What is the amount of blake recognized gain or loss : This year, Blake, Charlotte, and Olivia form Heron Corporation. What is the amount of Blake's recognized gain or loss
What challenges do you see on the horizon for strategic plan : Considering legislation and quality improvement measures, what challenges do you see on the horizon for strategic planning?

Reviews

Write a Review

Financial Management Questions & Answers

  Assume that the maintenance costs occur at year-end

Gold Star Industries is contemplating a purchase of computers. The firm has narrowed its choices to the SAL 5000 and the HAL 1000. Gold Star would need seven SALs, and each SAL costs $3,150 and requires $360 of maintenance each year. Assume that the ..

  What is the maximum amount he can borrow

A few years ago, Michael Tucker purchased a home for $134000. Today the home is worth $172000. His remaining mortgage balance is $61000. Assuming Michael can borrow up to 68 percent of the market value of his home, what is the maximum amount he can b..

  Define investment bankers expect to exercise the option

The investment bankers expect to exercise the option and purchase the 300,000 shares in exactly one year, when the stock price is fore-casted to be $4.50 per share. However, there is a chance that the stock price will actually be $10.00 per share ..

  Show that there is an arbitrage opportunity

Suppose BJ's stock price is currently $50 and a dividend of $2 is expected in two months. A six-month European call option on the stock with exercise price of $48 is selling for $5. A six-month European put option on the stock with exercise price of ..

  What was dividend yield and capital gains yield

Suppose a stock had an initial price of $58 per share, paid a dividend of $1.90 per share during the year, and had an ending share price of $68. What was the dividend yield and the capital gains yield?

  What is the return of the equity in each case

Suppose she funds the project by borrowing $750 rather than $500. a. According to MM Proposition I, what is the value of the equity? What are its cash flows if the economy is strong? What are its cash flows if the economy is weak? b. What is the retu..

  Do employees agree to develop job skills because of pay

Many would argue that if an employee receives a decent salary, he or she will be satisfied and remain with the organization. What are your thoughts on this statement? Does compensation motivate behavior? Do people join a firm because of pay? Do peopl..

  Accumulate funds to provide retirement annuity

Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Jill Moran. Ms. Moran, by contract, will retire at the end of exactly 12 years. How large a sum must Sunrise accumulate by the end of ye..

  Calculate the payment

$500 per quarter is deposited at the end of each quarter into a fund earning a nominal rate of 6% convertible quarterly for five years. The moment after the last payment is made, the balance of the fund is used to purchase a perpetuity immediate whic..

  Using the percent of sales method-projected current assets

The chief financial officer of AJAX Industries expects sales to increase from $8,000,000 in 2010 to $12,000,000 in 2011. Current assets in 2010 are equal to $5,000,000. Using the percent of sales method, projected current assets for 2011. Please show..

  Fraction of your money will be invested in risk-free bonds

You own some shares of Microsoft worth $1,000. Beta of Microsoft is 2. Microsoft currently has no debt. Microsoft decides to issue debt and buy back some of its stock in open market. Effectively, you want to undo the leverage of Microsoft. What fract..

  What is the projects equivalent annual annuity

What is the project's equivalent annual annuity?

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