All else the same, callable bonds have less interest rate sensitivity than noncallable bonds. Why? Is this

Question:

All else the same, callable bonds have less interest rate sensitivity than noncallable bonds. Why? Is this a good thing?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals of Investments Valuation and Management

ISBN: 978-0077283292

5th edition

Authors: Bradford D. Jordan, Thomas W. Miller

See More Books

Question Posted: Sep 19, 2012 05:10 AM

See More Questions

Why are callable and convertible bonds considered to add to managements future flexibility in financing a business?
Why would a callable bond have a higher rate of interest than a non-callable bond?
Why are convertible bonds less risky than stock but usually more risky than nonconvertible bonds?
It was reported that 23% of U.S. adult cellphone owners called a friend for advice about a purchase while in a store. If a sample of 15 U.S adult cellphone owners is selected, what is the probability...
Find the area of the surface generated by revolving the curve x = t + 7, y = t2/2 + 7, for - 7 t 7 about the y-axis.
Peremptory challenges may not constitutionally be used to exclude a potential juror from a trial on racial or gender grounds. a. Must a criminal jury reflect the ethnic or racial diversity of the...
What are some of the legal ramifications?
CVP analysis, shoe stores (continuation of 3-38). Refer to requirement 3 of Problem 3-38. In this problem, assume the role of the owner of WalkRite. 1. Calculate the number of units sold at which the...
Manufacturing Costs Assigned Job Number April May June Month Completed 10 $6,060 $5,420 May 11 4,800 4,640 $2,360 June 12 12 1,340 April 13 5,470 5,310 June 14 7,000 4,210 Not complete Job 12 was...
As a new analyst, you have calculated the following annual rates of return for the stocks of both Lauren Corporation and Kayleigh Industries. Your manager suggests that because these companies...
What is the difference between put bonds and extendible bonds?
Two callable bonds are essentially identical, except that one has a refunding provision while the other has no refunding provision. Which bond is more likely to be called by the issuer? Why?
A key hospital outcome measure of clinical performance is length of stay (LOS); that is, the number of days a patient is hospitalized. For patients at one hospital with acute myocardial infarction...
wal-mart company present about what the company does and it's history, second talk about the incident that you believe makes the company is unethical, and third you should analyze the incident and...
write comment on theevaluation summary report the learner prepared and discussed with you. was it accurate?
Jolon and Ananda Riley are married, file a joint return, and qualify for the earned income credit. The Rileys have two qualifying children. Ananda receives wages of $30,000, and Ananda and Jolon earn...
The purpose is to critically evaluate the use of Non-GAAP disclosures and their relation to GAAP disclosures. Refer first to Exhibit C. 1. Why do firms provide Non-GAAP information? At HP, was GAAP...
WHAT IS CALLED AN EVENT DRIVEN SYSTEM USED TO DEVELOP AND ACQUIRE NEW SYSTEM FOR THE MILITARY ?
What are the principal intentional torts?
Ball bearings are widely used in industrial applications. You work for an industrial food machinery manufacturer and your role is to design the driveshaft assembly on a new type of equipment that...
Is adultery, fornication, or illicit cohabitation a crime in your state? If so, what are their elements?
Use the following income statements and balance sheets to calculate Garnet Inc.'s free cash flow for 2005. Garnet Inc. 2004 2005 INCOME STATEMENT Net sales $530.0 $500.0 Costs (except depreciation)...
EMC Corporation has never paid a dividend. Its current free cash flow is $400,000 and is expected to grow at a constant rate of 5 percent. The weighted average cost of capital is WACC _ 12%....
Brooks Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively, and after the second year it is expected to grow at a constant...
A project costs $80 MM, with 25% of the investment int in year 1 and the balance in year 2. The plant operates atates at 50% capacity in year 3 and then full capacity for the next next 20 years. The...
What is organizational Behaviour the study of? How is social sciences related to organizational behavior? What is the difference between social science and organizational behavior? What is the...
Describe the nature of organization change, including forces for change and planned versus reactive change

All else the same, callable bonds have less interest rate sensitivity than noncallable bonds. Why? Is this

Question:

Step by Step Answer:

Because of the negative convexity effect callable bonds cannot rise in value as far as n...View the full answer

Fundamentals of Investments Valuation and Management

Students also viewed these Accounting questions