Question

1. Are bond prices are equally sensitive to the same percentage increases or decreases of the...

1. Are bond prices are equally sensitive to the same percentage increases or decreases of the market interest rate (YTM)? Explain and use an example of: Market interest rate increases, say, from 5% to 6% and decreases from 5% to 4%).

2A Explain the impact of coupon amounts (example use: $30 coupon vs. $$85 coupon) on the interest rate sensitivity of a bond.

2B if the market interest rate changes, which bond's price will change more, the one with the low or high coupon? (assuming other things are identical.) Explain why?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
1. please explain the impact of coupon amounts (say $30 coupon vs. $$85 coupon) on the...
1. please explain the impact of coupon amounts (say $30 coupon vs. $$85 coupon) on the interest rate sensitivity of a bond. In other words, if the market interest rate changes, which bond's price will change more, the one with the low or high coupon? (assuming other things are identical.) Briefly explain why? 2. what is the relationship between the time to maturity and interest rate sensitivity of bonds, other things held constant?
1. You own a bond with the following features:               Face value of $1000,               Coupon...
1. You own a bond with the following features:               Face value of $1000,               Coupon rate of 3% (annual)               12 years to maturity. The bond is callable after 7 years with the call price of $1,063. If the market interest rate is 4.27% in 7 years when the bond can be called, if the firm calls the bond, how much will it save or lose by calling the bond? State your answer to the nearest penny (e.g., 84.25)...
1. Assuming all else is constant, which of the following statements is CORRECT? a. Other things...
1. Assuming all else is constant, which of the following statements is CORRECT? a. Other things held constant, a 20-year zero coupon bond has more reinvestment risk than a 20-year coupon bond. b. Other things held constant, price sensitivity as measured by the percentage change in price due to a given change in the required rate of return decreases as a bond's maturity increases. c. Other things held constant, for any given maturity, a 1.0 percentage point decrease in the...
Finance 1. A bond has a $1,000 par value, 10 years to maturity, and an 8%...
Finance 1. A bond has a $1,000 par value, 10 years to maturity, and an 8% annual coupon and sells for $980. a. What is its yield to maturity (YTM)? Round your answer to two decimal places. __% b. Assume that the yield to maturity remains constant for the next four years. What will the price be 4 years from today?Do not round intermediate calculations. Round your answer to the nearest cent. $____ 2. Nesmith Corporation's outstanding bonds have a...
1) A bond will mature in 20 years. It has a 5% coupon rate and will...
1) A bond will mature in 20 years. It has a 5% coupon rate and will pay annual coupons. If the bond has a face value of $1,000 and a 4% yield to maturity, what should be the price of the bond today? What if YTM goes up to 5%? What if YTM goes up to 6%? (2) What would be the price of the bond above in (1) if the coupons were paid semiannually? (3) What is the relationship...
1. What happens to the prices of bonds as the market rate of interest increases? Doubles...
1. What happens to the prices of bonds as the market rate of interest increases? Doubles Decreases Increases Stays the same 2. Why do long-term bonds typically have higher coupon rates shorter-term bonds? They have a higher rate of return. They are a lower tax risk. More investors want to buy them. They are riskier investments. Entries for Issuing Bonds Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson Co. issued $270,000 of 20-year, 7% bonds on...
1. Omega Enterprises has an 8% coupon bond with exactly 16 years to maturity. Interest is...
1. Omega Enterprises has an 8% coupon bond with exactly 16 years to maturity. Interest is paid semi-annually. The bond is priced at $1,125 per $1,000 of face value. a.) What is the yield to maturity on this bond? b.)An investor purchased the bond at $1,125 and sold it 5 years later at a price of $1,023. What was the investor’s return. (Hint: calculate the YTM as in a) above but use the sale price as the future value. 2....
Q1) Consider the following statements: Statement 1. When amortizing a bond discount, the bond’s amortized cost...
Q1) Consider the following statements: Statement 1. When amortizing a bond discount, the bond’s amortized cost decreases each period as the interest expense increases. Statement 2. When amortizing a bond premium, the bond’s amortized cost increases each period as the interest expense increases. Select one: a. Neither of the statements is correct b. Only statement 1 is correct c. Only statement 2 is correct d. Both statements are correct Q2) A type of amortization method used to amortize bond discount/premium...
Issuer Symbol Callable Coupon _rate Maturity Moody Rating GE BRK3680632 Yes 7.35% 07/15/2023 Aa3 Price Yield...
Issuer Symbol Callable Coupon _rate Maturity Moody Rating GE BRK3680632 Yes 7.35% 07/15/2023 Aa3 Price Yield 124.38 _____ Use the above information to answer the following questions (31-38) 31. This bond is callable. This means that a. GE bondholders can convert bond to stocks when the bond is called. b. GE company is expected to call back this bond when the market interest rate decreases. c. GE is expected to call back this bond when GE stock price increases. d....
1.) Last year Janet purchased a $1,000 face value corporate bond with an 8% annual coupon...
1.) Last year Janet purchased a $1,000 face value corporate bond with an 8% annual coupon rate and a 15-year maturity. At the time of the purchase, it had an expected yield to maturity of 12.09%. If Janet sold the bond today for $1,055.86, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places. 2.) Bond X is noncallable and has 20 years to maturity, a...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT