Question: A consol bond will pay $100 annually in perpetuity. It is presently trading for $1428. Using duration, what is the closest change in price if

  1. A consol bond will pay $100 annually in perpetuity. It is presently trading for $1428. Using duration, what is the closest change in price if interest rates increase uniformly by 2% per year at all horizons?
  1. -$311.88
  2. -$408
  3. +$311.88
  4. +$408
  5. Unable to determine with information provided

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

From the income statement, determine the income tax expense for the year ended February 1, 2020. Tie that number to the second table in Disclosure Note 18, Provision for Income Taxes, and prepare a...

Q:

this is Finance questions ! please, help me for this . thnk FINA3313-005 Homework 2 Fall 2015 FINA3313-005 Homework 2 Chapter 04 Measuring Corporate Performance True / False Questions 1. The higher...

Q:

Mind solving should show you got your answers 31. As a mid-size company, you have a pension plan which pays out $10 million a year forever. The first payment is exactly one year from now. The term...

Q:

Introduction...// A company must raise new capital externally to invest in a new project. The investment cost of the project is 100 and the project generates a certain cash flow of 140. This...

Q:

I am wondering if anyone has corrected solutions to fnce 300 assignments 1 2 and 3. I am concered about my answers and would love to compare. Pretty sure on my answers for 1 and 2 mainly interested...

Q:

Case Analysis 1. Compute the yield to maturity of Land'o'Toys' bonds before the purchase announcement and use it to determine the likely current bond rating. (Compare YTM to the table on p. 269)....

Q:

The price of a stock in the market is $75. You know that the firm has just paid a dividend of $2.50 per share (i.e., D0 = 2.50). The dividend growth rate is expected to be 6 percent forever. What is...

Q:

Hello my friend please assist me with my discussion Interest Rates Negotiation is a soft skill that might just be one of the most important skills you will ever learn. For this Discussion you will...

Q:

Short answer questions ( please one paragraph for each question- each question has up to 4 points). While recognizing that OBS ( Off- Balance Sheet) instruments may add to the risk of an FIs...

Q:

Problem 10. Answer and Explain 1. Which of the following is not likely a concern pertaining to agency costs? a. Incentive alignment between management and the board of directors b. Incentive...

Q:

Having trouble with this homework if anyone can provide assitance it would be helpful 1.An investor is in a 30% tax bracket. If corporate bonds offer 5% yields, what must municipals offer for the...

Q:

Compare Pakistan and China based on the assumptions and revelations drawn from IPAT equation. The facts and figures must be cited properly from the sources.

Q:

Here a word 'S' of length 'n' is said to be a magic word if it satisfies the following conditions: All letters of S are lowercase letters of the English alphabet Si , the character in the i-th...

Q:

What is the highest expense in 2 0 1 9 ? a . Solary b . Rent C Utilites

Q:

Multi-part Problem The balance sheet and income statement shown below are for Byrd Inc., and the data are to be used for the questions below. Explain HOW the answers are obtained. The answers are...