What is the percentage change in price of these bonds

Assignment Help Financial Management
Reference no: EM131300369

Both Bond Bill and Bond Ted have 11.6 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 6 years to maturity, whereas Bond Ted has 23 years to maturity. Both bonds have a par value of 1,000.

If interest rates suddenly rise by 3 percent, what is the percentage change in the price of these bonds?

If rates were to suddenly fall by 3 percent instead, what would be the percentage change in the price of these bonds?

Reference no: EM131300369

Questions Cloud

Degree of operating leverage at the indicated sales volume : What is the profit for the company at the indicated sales volume? What is the break-even point in units? What is the degree of operating leverage at the indicated sales volume?
The firms commercial construction business : The R. Morin Construction Company needs to borrow $90,000 to help finance the cost of a new $126,000 hydraulic crane used in the firm's commercial construction business. The crane will pay for itself in 1 year, and the firm is considering the followi..
Make the initial deposit today rather than ten years : You can deposit $11,000 into an account paying 7% annual interest either today or exactly 10 years from today. ow much better off will you be at the end of 35 years if you decide to make the initial deposit today rather than 10 years from today?
Finance business expansion with short term debt : If the yield curve is downward sloping short-term interest rates are higher than long-term rates. Why might a borrower still choose to finance a business expansion with short term debt?
What is the percentage change in price of these bonds : Both Bond Bill and Bond Ted have 11.6 percent coupons, make semiannual payments, and are priced at par value. Bond Bill has 6 years to maturity, whereas Bond Ted has 23 years to maturity. Both bonds have a par value of 1,000. If interest rates sudden..
Three-month european call options with strike price : The current price of a stock is $84, and three-month European call options with a strike price of $85 currently sell for $4.20. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares and buying 2..
Annual percentage increase in winner check over this period : In 1901, the first Green Jacket Golf Championship was held. The winner's prize money was $210. In 2015, the winner's check was $1, 550,000. What was the annual percentage increase in the winner's check over this period?
The implicit annual rate of return : You are reviewing your portfolio for which you know that 10 years ago you invested $17,850 in Amazon stock (AMZN). You are pleasantly surprised that the current value of the stock is $227,985. However, realizing that it was 10 years ago, you are inte..
Annual equivalent expense for operating-maintaining furnace : A small company heats its building and spends ?$7,800 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 10?% per year starting one year from now? (i.e., the first cash flow is ?$8580 at EOY? one). what is the ..

Reviews

Write a Review

Financial Management Questions & Answers

  Calculating real rates

You’ve observed the following returns on Doyscher Corporation’s stock over the past five years: –24.9 percent, 13.6 percent, 30.2 percent, 2.3 percent, and 21.3 percent. The average inflation rate over this period was 3.23 percent and the average T-b..

  Why is asset allocation still considered important

You are the chief financial officer of Donnelly Industries. On multiple occasions, you have engaged in insider trading but have never been able to earn any abnormal returns. Which form of market efficiency most likely exists given your situation? If ..

  Total real return on investment

You bought one of Great White Shark Repellant Cos 6.6 percent coupon bonds one year ago for $1,056. These bonds make annual payments and mature 11 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 4..

  Calculate eps before and after change in capital structure

Consider a firm with an EBIT of $567,000. The firm finances its assets with $1,170,000 debt (costing 6.1 percent) and 217,000 shares of stock selling at $13.00 per share. The firm is considering increasing its debt by $900,000, using the proceeds to ..

  Estimate of business optimal capital structure

Which of the following factors influence(s) the estimate of a business's optimal capital structure? If debt financing is used in a for-profit corporation, more of a firm's operating income is available for distribution to investors (owners and credit..

  True regarding estate taxes

Which of the following is not true regarding estate taxes?

  College tuition has been rising at a rate

College tuition has been rising at a rate of 7% per year. Currently the average tuition of a state college is $10,600 per year. Andrea's son Trevor will begin college in 9 years. Andrea's portfolio is making 2% annually. How much does Andrea need to ..

  Use of the beta measure as indicator of portfolio risk

Tom Max TMP, quantitative analyst, has developed a portfolio construction model about which he is excited. To create the model, TMP made a list of the stocks currently in the S&P 500 Stock Index and obtained annual operating cash flow, price, and tot..

  Using net present value when evaluating projects

Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping’s cost of capital is 8.45 percent. What is the NPV of a project if the initial costs are $1,742,890 and the project life is estimated as 12 years? Th..

  Increase in the value of the company after the loan

The Maxwell Company is financed entirely with equity. The company is considering a loan of $1.83 million. The loan will be repaid in equal instalments over the next two years, and it has an interest rate of 8 percent. The company’s tax rate is 35 per..

  The payoff of an interest rate libor floor

The payoff of an interest rate LIBOR floor (the opposite of a cap) is of the form max[K - Last period LIBOR rate), 0]. That is, if rates go below K, the option writer will pay the difference, nothing otherwise.

  What would help diminish your fear of employee flight

As CEO of an emerging tech company, you feel the company has almost all of the connections in place for a major breakthrough, but you fear some of your key employees are getting nervous about their security. What would help diminish your fear of empl..

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