Here,
A perpetuity with a yield of 8%
Perpetuity has highest duration, so it will have greatest price increase if interest rates decreases.
Which of the following is likely to have the greatest price increase if interest rates decrease....
Which of the following bonds will have the greatest degree of interest-rate risk? A. A 10-year, 6% semi-annual coupon with a yield of 6% B. A 10-year 5% semi-annual coupon with a yield of 6% C. An 8-year, 6% semi-annual coupon with a yield of 6% D. An 8-year, 5% semi-annual coupon with a yield of 6%
If you anticipate interest rates will increase, which of the following bonds will you purchase? Note: the four bonds have exactly the same characteristics except for the duration. Hint: think of the change in price A bond with a duration of 5 years. A bond with a duration of 10 years. A bond with a duration of 20 years.
Todd owns a thirty-year zero-coupon bond priced at $304.78. If interest rates increase by 50 basis points, how much will the bond change? a. The price will decrease less than 5%. b. The price will increase less than 5%. c. The price will decrease between 5% and 10%. d. The price will decrease more than 10%.
Terry owns a thirty-year zero-coupon bond priced at $304.78. If interest rates increase by 50 basis points, how much will the bond change? a. The price will decrease less than 5% b. The price will increase less than 5% c. The price will decrease between 5% and 10% d. d. The price will decrease more than 10%
Terry owns a thirty-year zero-coupon bond priced at $304.78. If interest rates increase by 50 basis points, how much will the bond change? a. The price will decrease less than 5 % b. The price will increase less than 5% c. The price will decrease between 5% and 10 % d. d. The price will decrease more than 10 %
Three $1,000 face value, 10-year, noncallable, bonds have the same amount of risk, hence their YTMs are equal. Bond 8 has an 8% annual coupon, Bond 10 has a 10% annual coupon, and Bond 12 has a 12% annual coupon. Bond 10 sells at par. Assuming that interest rates remain constant for the next 10 years, which of the following statements is CORRECT? a. Since the bonds have the same YTM, they should all have the same price, and since...
QUESTION 23 Buffy, who lives in NY City, is in the 30% federal tax bracket and 6% state income tax bracket. Which of the following bonds that she is considering purchasing has the highest after-tax yield: (1) Treasury bond paying 4.7%. (2) Corporate bond paying 4.9%. (3) Louisiana Municipal bond paying 3.5%. O a. 1 only. b. 2 only. O c. 3 only. d. 1 and 3 are the same and have the highest after-tax yield. QUESTION 24 Todd owns...
2) Assume that you have a 10 year Treasury Bond with a yield of 2.76%, coupon rate of 2.35%, paying annual coupon payments. Assume the face value of the bond is $1,000. Shock the yield on the bond by 100 basis points up and down to determine the approximate duration and approximate convexity of the bond. Determine the approximate percentage change in the price of the bond because of the effects of duration and convexity when there is a 100...
Suppose interest rates increase from 4% to 5%. Between a 30-year bond paying an annual coupon of 4% or a 5-year bond paying an annual coupon of 4%, which of the two bonds will suffer the greater percentage decline in value? Why does this bond have greater interest rate risk? (Assume both bonds have equal credit risk.)
Interest Rate Sensitivity A bond trader purchased each of the following bonds at a yield to maturity of 8%. Immediately after she purchased the bonds, interest rates fell to 6%. What is the percentage change in the price of each bond after the decline in interest rates? Fill in the following table. Assume annual coupons and annual compounding. Do not round intermediate calculations. Round the monetary values to the nearest cent and percentage values to two decimal places. Price @...