Find the Macaulay duration and the modified duration of a 20-year, 10% corporate bond priced to yield
Question:
Find the Macaulay duration and the modified duration of a 20-year, 10% corporate bond priced to yield 8%. According to the modified duration of this bond, how much of a price change would this bond incur if market yields rose to 9%? Using annual compounding, calculate the price of this bond in one year if rates do rise to 9%. How does this price change compare to that predicted by the modified duration? Explain the difference.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 40% (15 reviews)
To calculate the duration of the bond first calculate the bonds current market price Bond terms 10 coupon 20 years 8 YTM Price N 20 I 8 PMT 100 FV 100...View the full answer
Answered By
Ashington Waweru
I am a lecturer, research writer and also a qualified financial analyst and accountant. I am qualified and articulate in many disciplines including English, Accounting, Finance, Quantitative spreadsheet analysis, Economics, and Statistics. I am an expert with sixteen years of experience in online industry-related work. I have a master's in business administration and a bachelor’s degree in education, accounting, and economics options.
I am a writer and proofreading expert with sixteen years of experience in online writing, proofreading, and text editing. I have vast knowledge and experience in writing techniques and styles such as APA, ASA, MLA, Chicago, Turabian, IEEE, and many others.
I am also an online blogger and research writer with sixteen years of writing and proofreading articles and reports. I have written many scripts and articles for blogs, and I also specialize in search engine
I have sixteen years of experience in Excel data entry, Excel data analysis, R-studio quantitative analysis, SPSS quantitative analysis, research writing, and proofreading articles and reports. I will deliver the highest quality online and offline Excel, R, SPSS, and other spreadsheet solutions within your operational deadlines. I have also compiled many original Excel quantitative and text spreadsheets which solve client’s problems in my research writing career.
I have extensive enterprise resource planning accounting, financial modeling, financial reporting, and company analysis: customer relationship management, enterprise resource planning, financial accounting projects, and corporate finance.
I am articulate in psychology, engineering, nursing, counseling, project management, accounting, finance, quantitative spreadsheet analysis, statistical and economic analysis, among many other industry fields and academic disciplines. I work to solve problems and provide accurate and credible solutions and research reports in all industries in the global economy.
I have taught and conducted masters and Ph.D. thesis research for specialists in Quantitative finance, Financial Accounting, Actuarial science, Macroeconomics, Microeconomics, Risk Management, Managerial Economics, Engineering Economics, Financial economics, Taxation and many other disciplines including water engineering, psychology, e-commerce, mechanical engineering, leadership and many others.
I have developed many courses on online websites like Teachable and Thinkific. I also developed an accounting reporting automation software project for Utafiti sacco located at ILRI Uthiru Kenya when I was working there in year 2001.
I am a mature, self-motivated worker who delivers high-quality, on-time reports which solve client’s problems accurately.
I have written many academic and professional industry research papers and tutored many clients from college to university undergraduate, master's and Ph.D. students, and corporate professionals. I anticipate your hiring me.
I know I will deliver the highest quality work you will find anywhere to award me your project work. Please note that I am looking for a long-term work relationship with you. I look forward to you delivering the best service to you.
3.00+
2+ Reviews
10+ Question Solved
Related Book For
Fundamentals of Investing
ISBN: 978-0133075359
12th edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
Question Posted:
Students also viewed these Corporate Finance questions
-
A bond has a Macaulay duration of 8.62 and is priced to yield 8%. If interest rates go up so that the yield goes to 8.5%, what will be the percentage change in the price of the bond? Now, if the...
-
If interest rates rise after a bond issue, what will happen to the bonds price and YTM? Does the time to maturity affect the extent to which interest rate changes affect the bonds price? (Again, an...
-
Explain how bond yields are calculated.
-
Class Median Midpoint, x Income, I 19.5 $12,965 An individual's income varies with age. The table shows the median income I of individuals of different age groups within the United States for a...
-
In the following examples, state how you would use the principle of marginal analysis to make a decision. a. Deciding how many days to wait before doing your laundry b. Deciding how much library...
-
Navigate to the discussion thread below and respond to the following: 1. Describe one initiative, practice, or policy you have been involved with over the past few years and then evaluate how...
-
Eighteen plots of land in Indiana were given different applications of nitrogen. In each case, the previous crop had been soybeans and all other factors were roughly comparable. Use the 18...
-
Determine the force in each member of the double scissors truss in terms of the load P and state if the members are in tension or compression. B L/3 -L13 L13- P.
-
The wholesale price for a chair is 1 0 3 . A certain furniture store and mark up the wholesale price by 1 7 % . Find the price of the chair in the furniture store. Round your answer to the nearest...
-
Complete the following table: Assets Liabilities + Owner's Equity . $17,500 ? + $11,500 b. ? $5,000 + $60,000 C. $15,000 $12,000 +
-
An investor wants to find the duration of a 25-year, 6% semiannual-pay, noncallable bond thats currently priced in the market at $882.72, to yield 7%. Using a 50 basis point change in yield, find the...
-
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...
-
Discuss the similarities and differences between the discounted dividend and corporate valuation models.
-
What communications does the attorney-client privilege protect? a. How is this privilege waived? b. Who is subject to this privilege? c. What should legal assistants do to preserve this privilege?
-
What is the relationship between deceit and misrepresentation?
-
Emergency is a defense a. if death is imminent and treatment is absolutely necessary for the patients survival. b. only if an emergency actually exists. c. as long as the emergency was not created by...
-
True Or False Legal assistants should make sure that client conferences are conducted in places where privacy is assured.
-
What does a professional who decides to allege contributory negligence usually argue?
-
The use of ethanol as an additive in gasoline is really a bad idea. Ethanol is produced from corn, and when 40 percent of the annual corn crop is burned up in car engines, that obviously raises the...
-
Cobb Manufacturing Company uses a process cost system and average costing. The following production data is for the month of June 2011. Production Costs Work in process, beginning of the month:...
-
Broussard Skateboard's sales are expected to increase by 15% from $8 million in 2016 to $9.2 million in 2017. Its assets totaled $5 million at the end of 2016. Broussard is already at full capacity,...
-
Refer to Problem 12-1.What would be the additional funds needed if the company's yearend 2016 assets had been $7 million? Assume that all other numbers, including sales, are the same as in Problem...
-
Refer to Problem 12-1. Return to the assumption that the company had $5 million in assets at the end of 2016, but now assume that the company pays no dividends. Under these assumptions, what would be...
-
1. Develop a definition for the Triple C model of project management. 2. List some of the factors that can impede the flow of information for project planning purposes. How can these factors be...
-
The Meat Mart has $900,000 in net income. The firm has 200,000 shares of stock outstanding. The market price per share is $76. What is the PE (price to earnings) ratio?
-
Cost of Goods Manufactured for a Manufacturing Company The following information is available for Fuller Manufacturing Company for the month ending January 31: Cost of direct materials used in...
Study smarter with the SolutionInn App