Calculate the duration of a five-year bond with a face value of $1,000 and a coupon rate
Question:
Calculate the duration of a five-year bond with a face value of $1,000 and a coupon rate of 8%. Assume that the current interest rates are 10%. What will your answer be if the current interest rates fall to 7%? Show all your calculations.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 50% (2 reviews)
To calculate the duration of a bond we can use the following formula Duration Sum of Present value o...View the full answer
Answered By
Abigael martinez
I have been a tutor for over 3 years and have had the opportunity to work with students of all ages and backgrounds. I have a strong belief that all students have the ability to learn and succeed if given the right tools and support. I am patient and adaptable, and I take the time to get to know each student's individual learning style in order to best support their needs. I am confident in my ability to help students improve their grades and reach their academic goals.
5.00+
1+ Reviews
10+ Question Solved
Related Book For
Financial Markets And Institutions
ISBN: 9781292215006
9th Global Edition
Authors: Stanley Eakins Frederic Mishkin
Question Posted:
Students also viewed these Business questions
-
For purposes of calculating net cash provided by operating activities, "Deferred revenue" is added to net earnings for fiscal year 2020 but subtracted from net earnings for fiscal year 2019. Please...
-
Create spreadsheet models to price coupon bonds, compute duration, and examine reinvestment risk. The purpose of this assignment is to get comfortable with basic spreadsheet modeling and to reinforce...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
The following set of dotplots with overlaid boxplots gives the number of pairs of flip-flops students said they owned for 13 males (top) and 37 females (bottom) in a statistics class. The five-number...
-
Suppose that a state statute requires that all civil lawsuits involving damages of less than $50,000 be arbitrated and allows such a case to be tried in court only if a party is dissatisfied with the...
-
Three years of combined data for two firms appear below (in millions). One of these firms is FedEx, a relatively high-growth firm that provides courier services, and the other is Kellogg Company, a...
-
8. Lloyd Dace worked for ACF Industries as a supervisor in the punchpress department of a carburetor factory. ACF demoted Dace to an hourly job on the assembly line, and
-
Appliance Center sells a variety of electronic equipment and home appliances. For the last 4 years, 2010 through 2013, the following quarterly sales (in $ millions) were reported. Determine a typical...
-
whatwill ronalds annual medical costs be if he selects POS plan? Ronald Roth started his new job as controller with Aerosystems today. Carole, the employee benefits clerk, gave Ronald a packet that...
-
Financial institutions hold a portfolio comprising the following securities: 10 million bond with duration 4 years 20 million securities with duration 6 years 40 million bonds with duration 5 years...
-
Consider a bond that promises the following cash flows. The yield to maturity is 12%. You plan to buy this bond, hold it for 2.5 years, and then sell the bond. a. What total cash will you receive...
-
Identify the customer relationships inherent in a product offering such as Google Street View?
-
Pureform, Incorporated, uses the FIFO method of process costing. It manufactures a product passing through two departments. Data for a recent month for the first department follow: Work in process...
-
A local management consulting firm is preparing a business report for the Government of Alberta. In particular, you have been hired by that firm to calculate the weighted average cost of capital (...
-
San Jose Company operates a Manufacturing Division and an Assembly Division. Both divisions are evaluated as profit centers. Assembly buys components from Manufacturing and assembles them for sale....
-
The management of Winstead Corporation is considering the following three investment projects (Ignore income taxes.): Project R $ 84,900 Project S $ 150,500 Investment required Project O $ 46,400...
-
A $ 1 , 0 0 0 face amount 8 % convertible bond has a conversion ratio of 2 0 . The firm s common stock is currently selling at $ 4 0 . If the bond is about to mature, what is its value?
-
Alta Company is constructing a production complex that for interest capitalization. The following information is available: Capitalization period: January 1, 2016, to June 30, 2017 Expenditures on...
-
Frontland Advertising creates, plans, and handles advertising campaigns in a three-state area. Recently, Frontland had to replace an inexperienced office worker in charge of bookkeeping because of...
-
Calculate the income gap given the following items: $8 million in reserves $25 million in variable-rate mortgages $4 million in checkable deposits $2 million in savings deposits $6 million of...
-
The following financial statement is for the current year. From the past, you know that 10% of fixed-rate mortgages prepay each year. You also estimate that 10% of checkable deposits and 20% of...
-
Chicago Avenue Bank has the following assets: What is Chicago Avenue Banks asset portfolioduration? Duration (in years) 0.55 2.35 5.90 Asset Value T-bills Consumer lons $40,000,000 Commercial Loans...
-
Need help . Programming Exercise 6-3 X Instructions Factorials.java + >_ Terminal + 1 public class Factorials 2 5 sandbox $ 1 Write an application that displays the factorial for every 3 public...
-
can Hiking Questions 1. Do you think wind turbines could replace fossil fuels in your area for electricity? Why or why not? 2. What do you think would happen if we harvested all of the wind for...
-
. -or- VK = (1 - W.At) . yk-1 + (w.At) . Uk-1 where, to summarize: Variable In code Definition Filtered signal at current time step (current iteration of void yk y k loop () ) Vk-1 y km1 Filtered...
Study smarter with the SolutionInn App