Suppose you buy a 7 percent coupon. 20-year bond today when it's first issued. If interest rates
Question:
Suppose you buy a 7 percent coupon. 20-year bond today when it's first issued. If interest rates suddenly rise to 15 percent, what happens to the value of your bond? Why?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 81% (11 reviews)
When the interest rate of a bond increases then the price of the bond will alsodecrease Explanation ...View the full answer
Answered By
Sandhya Sharma
I hold M.Sc and M.Phil degrees in mathematics from CCS University, India and also have a MS degree in information management from Asian institute of technology, Bangkok, Thailand. I have worked at a international school in Bangkok as a IT teacher. Presently, I am working from home as a online Math/Statistics tutor. I have more than 10 years of online tutoring experience. My students have always excelled in their studies.
4.90+
119+ Reviews
214+ Question Solved
Related Book For
Essentials of Corporate Finance
ISBN: 978-1259277214
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Question Posted:
Students also viewed these Cost Accounting questions
-
Suppose you buy a 9 percent coupon, 15-year bond today when it's first issued. If interest rates suddenly rise to 15 percent, what happens to the value of your bond? Why?
-
Present Value and Interest Rates what is the relationship between the value of an annuity and the level of interest rates? Suppose you just bought a 10-year annuity of $7,000 per year at the current...
-
What is the relationship between the value of an annuity and the level of interest rates? Suppose you just bought a 10-year annuity of $10,000 per year at the current interest rate of 10 percent per...
-
Perform the indicated operations. Let k be a natural number. a. (-2) c. (-2)4 e. Is (-2)2+ positive or negative? b. (-2) d. (-2)5
-
What arguments are there against the process of international harmonization of accounting?
-
The 20-lb block B rests on the surface of a table for which the coefficient of kinetic friction is k = 0.1. Determine the speed of the 10-lb block A after it has moved downward 2 ft from the rest....
-
Let \(\left(\mathscr{F}_{t} ight)_{t \geqslant 0}\) be an admissible filtration for the Brownian motion \(\left(B_{t} ight)_{t \geqslant 0}\). Mimic the proof of Lemma 2.14 and show that for each...
-
Larry Power started a new business in the name of Power Electrical on October 1, 2014. During October, a number of activities occurred and the following totals resulted at October 31, 2014 (shown in...
-
A beam of particles, each of mass m and (nonrelativistic) speed v, strikes a barrier in which there are two narrow slits and beyond which is a bank of identical detectors. The two slits may be of...
-
On Monday morning, you have $3000 in cash on hand. For the next seven days, the following cash requirements must be met: Monday, $5000; Tuesday, $6000; Wednesday, $9000; Thursday, $2000; Friday,...
-
Suppose the real rate is 1.9 percent and the inflation rate is 3.4 percent. What rate would you expect to see on a Treasury bill?
-
Suppose the following bond quote for IOU Corporation appears in the financial page of today's newspaper. Assume the bond has a face value of $1,000, and the current date is April 15, 2016. What is...
-
A drug is given to a patient to dilate her arteries. If the radius of an artery is increased from 2 to 2.1 millimeters, approximately how much is the cross-sectional area increased? [Assume that the...
-
Suppose you want to have $ 1 , 0 0 0 , 0 0 0 for retirement in 2 5 years. Your account earns 4 % interest. a ) How much would you need to deposit in the account each month? b ) How much interest will...
-
Recently, the FASB and International Accounting Standards Board (IASB) have been working on several projects in order to harmonize the accounting rules between GAAP and IFRS. This project requires...
-
Year System 1 System 2 0 -$15,500 -$43,200 1 15,500 30,700 2 15,500 30,700 3 15,500 30,700 Calculate NPV. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or...
-
I need help with discussion question Corporations are obviously not biological entities. However, the law finds it necessary to provide corporations with certain rights and responsibilities commonly...
-
An electromagnetic wave has energy of 9.9410^ -20J. Determine the wavelength In which region of the electromagnetic spectrum does the radiation fall under
-
In Problem, find the second derivative. y = 3x 2 - 3 x 2
-
Calculate the change in entropy when 100 kJ of energy is transferred reversibly and isothermally as heat to a large block of copper at (i) 0 C, (ii) 50 C.
-
Trade Credit Forms in what form is trade credit most commonly offered? What is the credit instrument in this case?
-
Trade Credit Forms in what form is trade credit most commonly offered? What is the credit instrument in this case?
-
Credit Period Length what are some of the factors that determine the length of the credit period? Why the length of the buyer iss operating cycle often considered an upper bound on the length of the...
-
Adjusting Entries and accounts 1) The company began 2021 with 350 hats which had a cost of $23 each. The company uses a periodic LIFO inventory system to cost their inventory. Employees physically...
-
The value derived from exercising an option immediately is the exercise value. No rational investor would exercise an option that is out-of-the-money, so the minimum exercise value is zero. The...
-
The Chicago Board Options Exchange (CBOE) is one of the world's largest options exchanges. CBOE and other options exchanges trade contracts that give buyers and sellers the right to trade investment...
Study smarter with the SolutionInn App