We have a 7%, 40 year bond. We buy it now at which point market yields are

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

Question:

We have a 7%, 40 year bond. We buy it now at which point market yields are 7%. Interest rates rise substantially to 12% per annum

How do i do the following- A,B & C? Below:

a. Derive the price alteration by using duration.

b. Also, find the exact price. Compare the two cases.

c. What strategies will enable us to attain a higher rate of return and protect the value of the portfolio more?

Related Book For answer-question

Income Tax Fundamentals 2013

ISBN: 9781285586618

31st Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill

See More Books

Posted Date: Apr 26, 2023 05:50 AM

See More Questions

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...
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
Use the present value tables in Appendix A and Appendix B to compute the NPV of each of the following cash inflows. a. $89,000 received at the end of six years. The discount rate is 4 percent. b....
1. U.S. Steel provides the following information in the notes to its financial statements relating to its use of the straight-line method of depreciation. Can you interpret the information contained...
Discuss how industry structure impacts competitive strategy choices.
What is a self-locking machine ?
Green Day Packers (GDP) purchased a computer for its back office operations in 2008 (Class 45, 45% CCA) for $5,000. Because of expanding operations, GDP purchased two additional computers in 2010 for...
The video link below will give an overview: https://www.youtube.com/watch?v=gTEMMiQXXVg NASA has made news in recent years due to its development of the controversial EmDrive, an "impossible" engine...
Review the problem in the Work It Out titled "Interpreting the AD/AS Model." Like the information provided in that feature, Table 24.2 shows information on aggregate supply, aggregate demand, and the...
Which of the following would be classified as a positive externality? O A surcharge for ambulance service is shifted to property taxes. Reselling outdated textbooks to under-funded public schools....
Tegan is a commission sales person. In October, Tegan sold $50,000 in product. What is the value of Tegan's commission? The commission rates are: 2% for the first $10,000 4% for the next $15,000 ...
A clothing company sells ski jackets every winter but must decide in the summer how many jackets to produce. Each jacket costs $65 to produce and ship and sells for $129 at retail stores. For the...
Stroud Corporation is an 80%-owned subsidiary of Pennie, Inc., acquired by Pennie several years ago. On January 1, 2017, Pennie sold land with a book value of $60,000 to Stroud for $90,000. Stroud...
New Center Co . has concluded a contract with the Defense Department for $ 4 9 5 , 0 0 0 with a forecasted cost of $ 3 7 5 , 0 0 0 . It is estimated at this time that 6 0 % of the job is complete...
These items are taken from the financial statements of Pronghorn Corp. at December 3 1 , 2 0 2 5 . Buildings $ 1 2 1 , 7 0 0 Accounts receivable 1 4 , 5 0 0 Prepaid insurance 5 , 3 8 0 Cash 1 3 , 6 2...
X Corp's net accounts receivable were P 250,000 at Dec 31, 2019 and P 300,000 at Dec 31, 2020. Net cash sales for 2020 are P 100,000 and the accounts receivable turnover for 2020 was 5. What were the...
In Exercises 105108, evaluate each expression without using a calculator. log(ln e)
Sophie is a single taxpayer. For the first payroll period in October 2012, she is paid wages of $3,250 monthly. Sophie claims three allowances on her Form W-4. a. Use the percentage method to...
Ray and Maria Gomez have been married 3 years. They live at 1610 Quince Ave., McAllen, TX 78701. Ray works for Palm Oil Corporation and Maria works for the City of McAllen. Maria's Social Security...
How are qualified dividends taxed in 2012? Please give the two rates of tax which apply to qualified dividends, and specify when each of these rates applies._________________________...
Apple stock is selling for $$120$ per share. Call options with a $$117$ exercise price are priced at $$12.$ What is the intrinsic value of the option, and what is the time value?
Ibrahim bought 200 shares of a stock trading in the Abu Dhabi Securities Exchange at AED 12 (United Arab Emirates dirham) per share. Over time, the price of the stock increased to AED 18 per share....
Twitter is trading at $$34.50.$ Call options with a strike price of $$35$ are priced at $$2.30$ . What is the intrinsic value of the option, and what is the time value?

We have a 7%, 40 year bond. We buy it now at which point market yields are

Question:

Expert Answer:

Assume Face value of bond is 100 a old price is 100 becouse bond is trading as par coupon rate and YTM are same Calculation of Price Alteration Durati... View the full answer

Income Tax Fundamentals 2013

Students also viewed these accounting questions