Consider a 9.5 year bond with a 4% coupon payable on a semi-annual basis: a) If par

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

Question:

Consider a 9.5 year bond with a 4% coupon payable on a semi-annual basis:

a) If "par" bonds of comparable maturity and credit quality are currently yielding 3.20%, What is the approximate price of this 4% bond (assume par is $1,000)?

b) Using a financial calculator, calculate the modified duration of this bond?

Related Book For answer-question

Investment Analysis and Portfolio Management

ISBN: 978-0538482387

10th Edition

Authors: Frank K. Reilly, Keith C. Brown

See More Books

Posted Date: May 04, 2023 07:03 AM

See More Questions

Using duration and convexity approximation, compute the percentageprice change on a 10-year fixed coupon bond, if the interest rate increases by 1%. The modified duration of the bond is 6 years, and...
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
Calculate the BEY for each of the following two 270-day securities. Instrument T: Quoted on 365 days at a rate of 3.2% Instrument U: using an add on rate of 360 days at 5.6% Calculate the bonds...
Since perpetuity payments continue forever, how can a present value be computed? Why isnt the present value infinite?
The strong neutron excess (defined as N - Z) of high-mass nuclei is illustrated by noting that most high-mass nuclides could never fission into two stable nuclei without neutrons being left over. For...
A rocket of initial total mass $m_{0}$ is fired vertically up from the north pole and accelerates until the fuel, which burns at a constant rate, is exhausted. The relative nozzle velocity of the...
Suppose Peters Hardware sells merchandise on account, terms 2/10, n/45, for $750 (cost of the inventory is $460) on May 17, 2010. Peters Hardware later received $225 of goods (cost, $140) as sales...
Classifying financial statement accounts The balance sheet or income statement classifies various items in one of the 1ollowng ways: CACurrent assets NANoncurrent assets CLCurrent liabilities...
Mr. Fantastic's garage purchases mufflers for his cars using a periodic review system. His annual demand is 3000 mufflers, standard deviation of daily demand is 6 mufflers, and one muffler costs $25...
Metro Land is a country located on a 2D Plane. They are having asummer festival for everyone in the country and would like tominimize the overall cost of travel for their citizens. Costs oftravel are...
Let ={0,1} be an alphabet. Now consider/interpret as the set of all possible real numbers R contained on the interval [0,1] represented in base 2. Let L be the language defined by the set of...
Daily Enterprises is purchasing a $ 1 0 . 4 million machine. It will cost $ 5 2 0 0 0 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage...
The most common form of color blindness, known as redgreen blindness, is an X-linked recessive trait affecting about 8% of the male population in the United States. What proportion of females would...
The following information is for the inventory of mini-kettles at Culver Company Limited for the month of May: Date Transaction Units In Unit Cost Total Units Sold Unit Price Total May 1 Balance 120...
Show that SBT a
2. Mr. And Mrs. James would like to need $30,000 per year during their retirement periods to have a comfortable life. They assume that they will retire in 20 years and expect a 15-year retirement...
A company wishes to determine the EOQ of an item that has an annual demand of 2,000 units, an order cost of $75, and an annual holding cost of $7.50 per unit. What is the total holding cost?
A Firm intends to invest some capital for a period of 15 years; the Firm's Management considers three Options, each consisting of purchasing a machinery of a specific brand, different for each...
What does the EMH imply for the use of technical analysis?
The rates of return computed in Problems 1, 2, and 3 are nominal rates of return. Assuming that the rate of inflation during the year was 4 percent, compute the real rates of return on these...
Your rate of return expectations for the common stock of Gray Cloud Company during the next year are: GRAY CLOUD CO. Possible Rate of Return Probability 0.10 ............0.25 0.00 ............0.15...
Describe how to determine the $x$ component of the position of an object at a specific instant, given (a) a graph of position $x$ as a function of time $t$ and (b) an equation for $x(t)$.
In an $x(t)$ curve, what is the significance of a steep slope as opposed to a gentle slope? What is the significance of a curve that slopes downward as you move from left to right along the time...
The $x$ component of a car's velocity increases from 0 to $+5.0 \mathrm{~m} / \mathrm{s}$ in $1.0 \mathrm{~s}$, and then from $+5.0 \mathrm{~m} / \mathrm{s}$ to \(+10 \mathrm{~m} /...

Consider a 9.5 year bond with a 4% coupon payable on a semi-annual basis: a) If par

Question:

Expert Answer:

ANSWER IS a The first step is to calculate the semiannual coupon payment Coupon payment 4 1000 2 20 ... View the full answer

Investment Analysis and Portfolio Management

Students also viewed these accounting questions