Question: Why is interest sensitivity important to bond speculators Does the
Why is interest sensitivity important to bond speculators? Does the need for interest sensitivity explain why active bond traders tend to use high-grade issues? Explain.
Answer to relevant QuestionsExplain why interest rates are important to both conservative and aggressive bond investors. What causes interest rates to move, and how can you monitor such movements? What’s the difference between current yield and yield to maturity? Between promised yield and realized yield? How does YTC differ from YTM? What is the current yield for a $1,000 par value bond that pays interest semiannually, has 9 years to maturity, and is currently selling for $937 with a bond equivalent yield of 12%? A zero-coupon bond that matures in 15 years is currently selling for $209 per $1,000 par value. What is the promised yield on this bond? Which one of the following bonds would you select if you thought market interest rates were going to fall by 50 basis points over the next 6 months? a. A bond with a Macaulay duration of 8.46 years that’s currently being ...
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