What would you expect to be the percentage change in price

Assignment Help Financial Management
Reference no: EM131323947

Assume that you have a liability portfolio of Duration = 5.125 years and a yield to maturity of 8.50%. If interest rates decrease by 1.0%, what would you expect to be the percentage change in the price?

Reference no: EM131323947

Questions Cloud

The minimum after tax cash flow ror : Consider a project that has 6 years of life time. This project requires investment of $1,000,000 at time zero for machinery and equipment to be depreciated over 5 year with half year straight line depreciation method (starting in year 1 to year 6). A..
What is cost of common equity : Summerdahl Resorts' common stock is currently trading at $40 a share. The stock is expected to pay a dividend of $2.00 a share at the end of the year (D1= $2.00), and the dividend is expected to grow at a constant rate of 8% a year. What is the cost ..
Stick with the current system and annual energy costs : As a large construction company IT manager you have been asked to decide if the company should invest in an upgrade to the servers that support your engineering department. If you stick with the current system, annual energy costs are $85,320, annual..
Nominal return on your investment : You want to have $5 million in real dollars in an account when you retire in 40 years. The nominal return on your investment is 13 percent and the inflation rate is 4.4 percent. What real amount must you deposit each year to achieve your goal?
What would you expect to be the percentage change in price : Assume that you have a liability portfolio of Duration = 5.125 years and a yield to maturity of 8.50%. If interest rates decrease by 1.0%, what would you expect to be the percentage change in the price?
Bond is currently selling for price greater than face value : A bond is currently selling for a price greater than face value. If the bond’s yield to maturity remains constant, which of the following statements is most correct:
Portfolio will be invested in the zero coupon bonds : Assume that you have only two assets from which to choose: one-year zero coupon bonds; and junk bonds with a duration of 9.0 years. If you have a liability portfolio with duration = 5.125 years has a present value of $3 million, what percentage of yo..
Annual costs-cash flow and cumulative cash flow : As a large construction company IT manager you have been asked to decide if the company should invest in an upgrade to the servers that support your engineering department. Make sure to include a cash flow table from your excel spreadsheet, include i..
Who is entitled to receive the interest you pay : You have a corporate (not a Treasury) bond which has a 7% coupon and pays interest on January 1 and July 1 of each year. Who is entitled to receive the interest you pay?

Reviews

Write a Review

Financial Management Questions & Answers

  Predict that the market will go up as the economy recovers

We know that the market should respond positively to good news and that good-news events such as the coming of the end of a recession can be predicted with at least some accuracy. Why, then, can we not predict that the market will go up as the econom..

  Assume that all interest received at the end of the year

You placed $2,302 in a savings account today that earns an annual interest rate of 5 percent compounded annually. How much you will have in this account at the end of 35 years? Assume that all interest received at the end of the year is reinvested th..

  Determine amount that will be capitalized for installation

A proposal has been made to purchase a machining center at a price of $950,000. The delivery will cost an additional $12,000. It will take a three-person maintenance crew two standard 40-hour weeks that earn $25 an hour each to install the needed ele..

  Unsophisticated investors to large institutional investors

“The recent wave of IPOs is an attempt by many small firms to capitalize on the recent run-up in stock prices.”  “IPOs transfer wealth from unsophisticated investors to large institutional investors who get in at the offer price and get out quickly.”

  What is the net present value of this car transaction

Suppose you want to buy a car for college. Your awesome uncle is willing to sell you his $20,000car which he no longer needs. He will only charge you 1% interest per year on the value of the car. Assuming 10 equal annual payments, what is the payment..

  Weighted average cost of capital-value of the firm

Slippery Slope Roof's net cash flows are as follows: After year 3, net cash flows grew at a constant rate of 3%. The weighted average cost of capital is 9%. What is the value of the firm?

  Depreciation expense-capital expenses-debt-debt principal

Mary has EAT, depreciation expense, capital expenses, debt and debt principal payments of $2m, $2.8m, $1.3m, $40m and $1.5m respectively. Moreover, Mary had operating profit of $2.5 million and its assets went from a total of $35 to $38 million. Addi..

  Determine the amount you will pay back

Determine the amount you will pay back and the annualized cost of borrowing for LIBORs of 6 percent and 12 percent.

  Creates protective put position by buying one share of stock

An investor creates a protective put position by buying one share of a stock at $50 and buying a European put option on the stock with strike price $45 at $1.25. What is his profit if he holds his position until maturity of the option and the stock p..

  What is the length of the days sales in inventory

Scribble, Inc. has sales of $92,000 and cost of goods sold of $76,000. The firm had a beginning inventory of $22,000 and an ending inventory of $24,000. What is the length of the days' sales in inventory? (Round your answer to 2 decimal places.)

  Commercial banks be forbidden to trade derivative securities

In 2010, Senator Blanche Lincoln (D-Arkansas) proposed that commercial banks be forbidden to trade derivative securities.- Discuss the arguments for and against this proposal.

  Assumptions underlying efficient market hypothesis

Explain the difference between observed market prices and intrinsic (unobservable) prices. Explain what makes a market “fair” Define operational efficiency. Define informational efficiency (speed of info, accuracy of info, and accuracy of response 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