Question: In this assignment, you will apply the principles used in calculating the price of a bond. Instructions: The yield of the 10-year US Treasury bond

In this assignment, you will apply the principles used in calculating the price of a bond.

Instructions: The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate.

You work for an investment manager and your boss asks you to calculate the price of a 10-year corporate bond that yields 3.00% more than its risk-free rate and has a face value of $1,000.

The fixed coupon of this corporate bond is 5.00%. Both bonds pay coupons annually.

What is the current price of the corporate bond?

Calculate the price of the bond if its yield increased by 1.00%.

Calculate the price of the bond if its yield decreased by 1.00%.

Please discuss the risk associated with this change in interest rates.

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!

Overview: In this assignment, you will apply the principles' used in calculating the price of a bond. Instructions: The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You...

In this assignment, you will apply the priniples used in calculating the price of a bond. Instructions: The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You work for...

Having some trouble please assist. Due Date: \$ 11: 59 \\mathrm{pm} \$ EST Sunday of Unit 7 Points: 100 Overview: In this assignment, you will apply the priniples used in calculating the price of a...

n this assignment, you will apply the priniples used in calculating the price of a bond. Instructions: The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You work for...

Overview: you will apply the priniples used in calculating the price of a bond. Instructions: The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You work for investment...

8. Bona yleias Coupon payments are fixed, but the percentage return that investors receive varies based on market conditions. This percentage return is referred to as the bond's yield. Yield to...

UNIT 5 QZ, Q-20 UNIT 5 / UNIT 8 QUESTIONS KEEP ANSWERS SEPARATE BY UNITS UNIT II STUDY GUIDE Consumer Mathematics Reading Assignment See information below. Key Terms 1. Add-on interest method 2....

8.1. Dulles Electric Company buys 1 million tons of coal annually to burn at its power plant. The company wants to invest in a unit train that will haul coal from the mine to the power house, where...

6.1. Carbondale Company has the following credit policy 2/10, net 30. Carbondale also charges 1% per month interest on all accounts after 30 days. The following table shows the collection schedule of...

The City of New York, New York, reported the following liabilities, among others, at June 30 of the years indicated. The amounts in the table are stated in thousands of dollars. None of these...

The following information was available for the year. Retained earnings, January 1, $160,000, Retained earnings, December 31, $130,000, Total expenses are $70,000 and dividends are $16,000. What was...

Question 2 of 3 / 1 5 Oriole Services, Inc. is trying to establish the standard labor cost of a typical brake repair. The following data have been collected from time and motion studies conducted...

8:37 * N. 80% i ... OBJECTIVES: Create relationships Create a Pivot Table from Related Tables Create a PivotChart Modify the PivotChart The major section in this chapter :ontinuation is: Data...

What do you need to know to develop an audience profile? [LO-2]

Come by the Technology Lounge where you can log on to computers and plugin laptops and check out demos of sponsors websites.

Considering what youve learned about nonverbal communication, what are some of the ways in which communication might break down during an online meeting in which the participants can see video images...