If the bond duration is 2.5 and the market rate of interest (the discount rate) rises...
If the bond duration is 2.5 and the market rate of interest (the discount rate) rises by 1 percentage point, what would be the percentage change in price?
Homework Answers
PERCENTAGE CHANGE IN PRICE = - BOND DURATION X CHANGE IN INTEREST RATE
PERCENTAGE CHANGE IN PRICE = -2.5 X 1% = -2.5% CHANGE = DECREASE IN PRICE BY 2.5%
ANSWER : - 2.5% CHANGE IN PRICE (THUMBS UP PLEASE)
Add Answer to:
If the bond duration is 2.5 and the market rate of interest (the
discount rate) rises...
Question 1 2 pts Duration: is always greater than maturity rises as the coupon payment rises....
Question 1 2 pts Duration: is always greater than maturity rises as the coupon payment rises. measures how bond prices change with changes in maturity. is a measure of total return. is a measure of how price sensitive a bond is to a change in interest rates. Question 2 2 pts What is the Macaulay's duration of a 10 year zero-coupon bond with a face value of $1,000 and a market rate of 8%, compounded annually is: 9 years 10...
The duration of a twenty year, 6 percent coupon bond when the interest rate is 7.80...
The duration of a twenty year, 6 percent coupon bond when the interest rate is 7.80 years. What happens to the price of the bond if the interest rates rises to 8%? it rises 15.6% it rises 14.7% it falls 15.6% it falls 14.7%
a) A portfolio manager wants to estimate the interest rate risk of a bond using duration. The current price of the bond is 98. A valuation model found that if interest rates decline by 35 basis points...
a) A portfolio manager wants to estimate the interest rate risk of a bond using duration. The current price of the bond is 98. A valuation model found that if interest rates decline by 35 basis points, the price will increase to 101 and if interest rates increase by 35 basis points, the price will decline to 96. What is the duration of this bond? b) A portfolio manager purchased a bond portfolio with a market value of $75 million....
You calculated duration of a bond which was 3.5. If the interest rate of the bond...
You calculated duration of a bond which was 3.5. If the interest rate of the bond decreases by 1%, what happens to the price of the bond? a. Decrease by $3.50 b. Decrease by 3.50% c. Increase by 3.50% d. Increase by $3.50 e. There is no change in price
Bond Duration: What is the duration of a bond with 7% discount rate, 3-year maturity, and...
Bond Duration: What is the duration of a bond with 7% discount rate, 3-year maturity, and 10% coupon paid annually?
A bond has a Macaulay duration of 9.50 and is priced to yield 7.5%. If interest...
A bond has a Macaulay duration of 9.50 and is priced to yield 7.5%. If interest rates go up so that the yield goes to 8.0%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7%, what will be the bond's percentage change in price? Comment on your findings. If interest rates go up to 8.0%, the percentage change in the price of the bond is %....
A bond that pays interest semiannually has a 2.5 percent promised yield and a price of...
A bond that pays interest semiannually has a 2.5 percent promised yield and a price of $1,225. Annual interest rates are now projected to increase 50 basis points. The bond's duration is 10 years. What is the predicted new bond price after the interest rate change? (Watch your rounding.)
When the market interest rate rises above the coupon rate for a particular quality of bond,...
When the market interest rate rises above the coupon rate for a particular quality of bond, the "current yield": will be below the coupon rate will be the same as the coupon rate will be above the coupon rate cannot be determined
If the equilibrium price in the bond market for a 1 year discount bond is 9400,...
If the equilibrium price in the bond market for a 1 year discount bond is 9400, then the equilibrium interest rate in the loanable funds market must be a 9.4% b.4% c 6% d. 6.4% I need help with finding the percentage on this problem. Please explain. Thank you
10. An investor wants to find the duration of a(n) 30-year, 9% semiannual pay, noncallable bond t...
10. An investor wants to find the duration of a(n) 30-year, 9% semiannual pay, noncallable bond that's currently priced in the market at $825.50, to yield 11%. Using a 50 basis point change in yield, find the effective duration of this bond (Hint use Equation 11.11). The new price of the bond if the market interest rate decreases by 50 basis points (or 0.5%) is $ The new price of the bond if the market interest rate increases by 50...
Question 1 2 pts Duration: is always greater than maturity rises as the coupon payment rises. measures how bond prices change with changes in maturity. is a measure of total return. is a measure of how price sensitive a bond is to a change in interest rates. Question 2 2 pts What is the Macaulay's duration of a 10 year zero-coupon bond with a face value of $1,000 and a market rate of 8%, compounded annually is: 9 years 10...
A bond has a Macaulay duration of 9.50 and is priced to yield 7.5%. If interest rates go up so that the yield goes to 8.0%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7%, what will be the bond's percentage change in price? Comment on your findings. If interest rates go up to 8.0%, the percentage change in the price of the bond is %....
10. An investor wants to find the duration of a(n) 30-year, 9% semiannual pay, noncallable bond that's currently priced in the market at $825.50, to yield 11%. Using a 50 basis point change in yield, find the effective duration of this bond (Hint use Equation 11.11). The new price of the bond if the market interest rate decreases by 50 basis points (or 0.5%) is $ The new price of the bond if the market interest rate increases by 50...
Most questions answered within 3 hours.
-
You capture data by having 8 people fill in 30 small dots on a
piece of...
asked 3 hours ago -
What are the z-values such that 70% of the area lies in the
middle of the...
asked 5 hours ago -
You borrow $29,500 to purchase a brand new car. The interest
rate is 6%, and the...
asked 5 hours ago -
The amount of time it takes an asteroid, whose average distance
from the Sun is 4.70...
asked 5 hours ago -
A 0.289 kg mass slides on a frictionless floor with a speed of
1.34 m/s. The...
asked 5 hours ago -
15.A box contains five red balls, three green balls, and two
yellow balls. Suppose you select...
asked 8 hours ago -
Assume you are given the following for Stackelberg industries:
Return on Assets (ROA) = 8%
Debt...
asked 7 hours ago -
an engineer proposes to use mmWave in 5G network to
increase data rate.
What are the...
asked 7 hours ago -
Explain the idea behind using SEMIJOIN in distributed
query processing.
asked 7 hours ago -
why
is context important in selecting and applying guidelines and
principles for interface design?
illustrate your...
asked 7 hours ago -
In a certain board game, a player rolls two fair six-sided dice
until the player rolls...
asked 8 hours ago -
You are going to deposit $3,200 in an account that pays .58
percent interest compounded quarterly....
asked 7 hours ago