Question
You have the following bond maturing in 4 years: Face Value = 1.000$; Semiannual dividends = 40$; Annual Interest rate= 6% Compute the PV of
You have the following bond maturing in 4 years:
Face Value = 1.000$;
Semiannual dividends = 40$;
Annual Interest rate= 6%
- Compute the PV of the cash flows?
- What will happen to the bond price if the interest rate decreases to 4%?
If the interest rate decreases to 4%, the bond price will increase because interest rates and bond prices have an inverse relationship.
- Compute both the duration and the modified duration of the bond?
- Interpret your results in question 3?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Practical financial management
Authors: William r. Lasher
5th Edition
0324422636, 978-0324422634
