All else equal, which bond’s price is more affected by a change in interest rates, a short-term bond or a longer-term bond? Why?
Answer to relevant QuestionsExplain how a bond’s interest rate can change over time even if interest rates in the economy do not change.Calculate the price of a zero coupon bond that matures in 15 years if the market interest rate is 5.75 percent. A client in the 39 percent marginal tax bracket is comparing a municipal bond that offers a 4.5 percent yield to maturity and a similar-risk corporate bond that offers a 6.45 percent yield. Which bond will give the client ...A corporate bond with a 6.5 percent coupon has 15 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.2 percent. The firm has recently gotten into some trouble and the rating agency is ...What is the taxable equivalent yield on a municipal bond with a yield to maturity of 3.5 percent for an investor in the 33 percent marginal tax bracket?
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