# Question

(a) If the discount rate that is used to calculate the present value of a debt obligation’s cash flow is increased, what happens to the price of that debt obligation?

(b) Suppose that the discount rate used to calculate the present value of a debt obligation’s cash flow is x%. Suppose also that the only cash flows for this debt obligation are $200,000 four years from now and $200,000 five years from now. For which of these cash flows will the present value be greater?

(b) Suppose that the discount rate used to calculate the present value of a debt obligation’s cash flow is x%. Suppose also that the only cash flows for this debt obligation are $200,000 four years from now and $200,000 five years from now. For which of these cash flows will the present value be greater?

## Answer to relevant Questions

The pension fund obligation of a corporation is calculated as the present value of the actuarially projected benefits that will have to be paid to beneficiaries. Why is the interest rate used to discount the projected ...What is the limitation of using the internal rate of return of a portfolio as a measure of the portfolio’s yield? Two portfolio managers are discussing the investment characteristics of amortizing securities. Manager A believes that the advantage of these securities relative to nonamortizing securities is that because the periodic cash ...(a) What is meant by an amortizing security? (b) What are the three components of the cash flow for an amortizing security? (c) What is meant by a cash flow yield? Explain why the duration of an inverse floater is a multiple of the duration of the collateral from which the inverse floater is created.Post your question

0