What if Marks Treasury bond in the previous problem had a coupon rate of 9% and new
Question:
What if Mark’s Treasury bond in the previous problem had a coupon rate of 9% and new bonds still had interest rates of 4%? For what price should Mark sell the bond in this situation?
Step by Step Answer:
Mark should value the bond at ...View the full answer
Related Video
Bond valuation is the process of determining the worth of a bond. It is based on the present value of the bond\'s future cash flows, which include coupon payments and the return of the bond\'s face value (or \"principal\") at maturity. The discount rate used in the calculation is directly tied to prevailing interest rates, and a rise in interest rates will decrease the present value of the bond and thus lower its price. Conversely, a fall in interest rates will increase the present value of the bond and raise its price. Interest rates serve as a benchmark for determining the value of a bond, as they determine the discount rate used in the bond valuation calculation. The most commonly used measure of interest rates is the yield to maturity (YTM), which represents the internal rate of return of an investment in a bond if the investor holds the bond until maturity and receives all scheduled payments. Yield to maturity is a function of the coupon rate, the current market price of the bond, the face value of the bond, and the number of years remaining until maturity. By comparing the yield to maturity of a bond to prevailing market interest rates, an investor can assess the relative value of the bond.
Students also viewed these Business questions
-
What if Marks Treasury bond in the previous problem had a coupon rate of 9% and new bonds still had interest rates of 8%? For what price should Mark sell the bond in this situation?
-
A bond with a coupon rate of 8 percent sells at a yield to maturity of 9 percent. If the bond matures in 17 years, what is the Macaulay duration of the bond? What is the modified duration?
-
A corporate $10,000 bond has a coupon rate of 8% per year, payable semiannually. The bond matures 20 years from now. At an interest rate of 6% per year, compounded semiannually, the amount and...
-
On October 1, 2020, Berlin Corp. purchased 250, $ 1,000, 9% bonds for $ 260,000. An additional $ 7,500 was paid for the accrued interest, which is paid semi-annually on December 1 and June 1. The...
-
Given the following information for OHara Marine Co., calculate the depreciation expense: sales = $43,000; costs = $26,000; addition to retained earnings = $5,600; dividends paid = $1,300; interest...
-
A fair triangular spinner with sides numbered 1, 2 and 3 is spun three times and the numbers that it comes to rest on are written down from left to right to form a three-digit number. a. How many...
-
The transfer function of a dynamic system is given by \[G(s)=\frac{s+4}{s^{5}+2 s^{4}+3 s^{3}+8 s^{2}+4 s+5}\] Determine the stability of the system a. Using Routh's stability criterion without...
-
Projects have a way of providing a chance for glory for many individuals. Unfortunately, they quite often give the not-so-creative individual an opportunity to demonstrate his incompetence. Examples...
-
The following schedule shows the Current Assets section of Water Source Company for the years ended December 31, 20Y8, and December 31, 20Y9: Water Source Company Comparative Schedule of Current...
-
A solid sphere is made by three materials taken as shown. total charge on system is Q. if magnitude of the electric field intensity at every boundary point is same then choose the correct option A)...
-
Ronnie owns 600 shares of a stock mutual fund. This year he received dividend distributions of sixty stock mutual fund shares ($40 per share) and long-term capital gain distributions of forty-five...
-
Timothy has an opportunity to buy a $1,000 par value corporate bond with a coupon rate of 7% and a maturity of five years. The bond pays interest annually. If Timothy requires a return of 6%, what...
-
A/ B testing is a method used by businesses to test different designs and formats of a web page to determine if a new web page is more effective than a current web page. Web designers tested a new...
-
What is Section 306 stock?
-
Do you think cyberbullying might have played a role in causing Tyler Clementi to take his life? How might friends and acquaintances respond if they know someone who is the victim of cyberbullying?
-
Define the employment relationship and discuss the changes that have taken place to the relationship in recent years.
-
What is an evidence- based intervention? Why is it important to adopt evidencebased interventions? What factors might you need to consider in adopting an evidence- based intervention?
-
Bullying is a serious problem in the United States. In small groups, have the students share ideas and strategies for addressing the problem of bullying online and offline, as well as in and out of...
-
The U.S. Open Championship golf tournament was played at Congressional Country Club, Bethesda, Maryland, with prizes ranging from $465,000 for first place to $5000. Par for the course was 70. The...
-
The financial statements of Eastern Platinum Limited (Eastplats) are presented in Appendix A at the end of this textbook. Instructions (a) Does East plats report any investments on its statement of...
-
How is taxable income calculated?
-
What is the difference between total income, net income, and taxable income?
-
What is meant by a progressive tax system? What is the difference between marginal and average tax rates?
-
What are Google's principal resources and capabilities? Explain.
-
Create 4 Communications Strategies - Bullet points and explanation Explain each one and how it will help you achieve your objectives.
-
To what extent has Google's strategy focused upon its resources and capabilities rather than specific customer needs?
Study smarter with the SolutionInn App