Question
You are considering purchasing a consol that promises annual payments of $4. a. If the current interest rate is 3 percent, what is the price
You are considering purchasing a consol that promises annual payments of $4. a. If the current interest rate is 3 percent, what is the price of the consol? Instructions: Enter your response to the nearest penny (two decimal places). The price of the consol is $ b. You are concerned that the interest rate may rise to 4 percent. Compute the percentage change in the price of the consol and the percentage change in the interest rate. Compare them. Instructions: Enter your response for dollar amounts rounded to the nearest penny (two decimal places ) and responses for percentages rounded to the nearest tenth (one decimal place). The new price of the consol would be $ The price of the consol falls by % and the interest rises by %. c. Your investment horizon is one year. You purchase the consol when the interest rate is 3 percent and sell it a year later, following a rise in the interest rate to 4 percent. What is your holding period return? Instructions: Enter your response rounded to the nearest tenth (one decimal place). Your holding period return is %
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