Question

What happens to the value of a four-year fixed income security promising $100 per year if...

  1. What happens to the value of a four-year fixed income security promising $100 per year if the market interest rate rises from 5% to 6% per year?

** Please show work, to solve problem**

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

I have answered the question below

Please up vote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

After finding the values at interest rates of 5% and 6% we find that at 6% the value of the bond is lesser than the interest rate at 5%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
WHY would a 4-year fixed income security promising $100 drop of $8.08 in market value if...
WHY would a 4-year fixed income security promising $100 drop of $8.08 in market value if interest rate rises from 5% to 6%?
Bond Valuation Assume A fixed income security is option-free. The par value (face amount) is $1,000....
Bond Valuation Assume A fixed income security is option-free. The par value (face amount) is $1,000. The coupons are paid on a semi-annual basis. The coupon rate is 4%. The current market yield for the security for the security is 3%. There are 8 years left to the maturity date. Deliverable Excel spreadsheet items. Calculate the price of the fixed income security. Show your work. Show the coupon payments in dollars each period. Show the principal payment in dollars (par...
Find the accumulated value of a 10-year annuity-immediate of 100 per year if the first 6...
Find the accumulated value of a 10-year annuity-immediate of 100 per year if the first 6 payments are invested at an effective rate of interest of 5% and the final 4 payments are invested at an effective rate of interest of 4%. (Yield curve method)
What is the future value of a five-year ordinary annuity of $1,000 per year if the...
What is the future value of a five-year ordinary annuity of $1,000 per year if the interest rate is 3.39%? Hint: solve for year 5.
Answer the following questions: What happens to the future value of some fixed dollar amount invested...
Answer the following questions: What happens to the future value of some fixed dollar amount invested today as the interest rate decreases? Why? What happens to the present value of some fixed dollar amount to be received in the future as the interest rate increases? Why? What happens to the present value of some fixed dollar amount to be received in the future as the time to receive the money decreases? Why? Which will have a higher present value, assuming...
If interest rates rise, the price of a not-yet mature fixed-income security can be expected to:...
If interest rates rise, the price of a not-yet mature fixed-income security can be expected to: (a) rise; (b) remain the same; (c) inflate; (d) decrease. The National Income and Product Accounts simultaneously provide data on: (a) production and efficiency; (b) technological progress and product improvements; (c) total output and the income derived from its production; (d) slugging percentage and on-base percentage. 5. Influences on real GDP or inflation separate and apart from the customary functioning of the economy over...
Bonds are priced per $100 face value 1) Consider a 10-year 6 percent coupon bond. a)...
Bonds are priced per $100 face value 1) Consider a 10-year 6 percent coupon bond. a) What is the price of this bond if the market yield is 6%? b) What is the price of this bond if the market yield is 7%? c) What is the price of this bond if the market yield is 5%? 2) Consider a 20-year 6 percent coupon bond. a) What is the price of this bond if the market yield is 6%? b)...
What is the price of a security that will pay off $100 at the end of...
What is the price of a security that will pay off $100 at the end of every year for the first 5 years ($100 year 1 through 5) and then every 5 years after that ($100 at the end of year 10, 15 …)? The annually compounded interest rate (EAR) is 10%. (HINT: put the cash payments on a time line).
Would you rather have $100 today or $105 in one year? What does your answer depend...
Would you rather have $100 today or $105 in one year? What does your answer depend on? What happens to your choice as the interest rate rises? As the interest rate falls?
You receive $100 per year for the next 10 years starting 1 year from today for...
You receive $100 per year for the next 10 years starting 1 year from today for a total of 10 payments. If the interest rate that you receive is 5% per year and the inflation rate is 3% per year, draw the cash flow diagram in constant dollars with a base year of 0. Solve for the future value at year 10 using constant dollar analysis.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT