Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $950. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places Bond Price $8,000 $ 10,000 $11.000 Interest Yield, % 10.56 7:31

Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $950. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places Bond Price $8,000 $ 10,000 $11.000 Interest Yield, % 10.56 7:31

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter9: The Financial Markets And The Economy: The Tail That Wags The Dog

Section: Chapter Questions

Problem 5TY

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Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $950. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price Interest Yield, % $8,500 10 $10,500 $11,500 7.04 b. What generalization can you draw from the completed table? O Bond prices and interest rates are directly related. O There is insufficient data to make a generalization. O Bond prices and interest rates are inversely related. O Bond prices and interest rates are not related.
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $800 a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed below or the bond price at each of the interest yields shown Instructions: Enter your responses in the gray-shaded cells. For bond prices, round your answers to the nearest dollar For interest yields, enter your answer as a percentage rounded to one decimal place. Bond Price Interest Yield, % $8,000 8.9% $10,000 $11,000 62% b. What generalization can be drawn from the completed table? O Bond prices and interest rates are inversely related O There is insufficient data to make a generalization. O Bond prices and interest rates are directly related. O Bond prices and interest rates are not related.
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $750. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price $ 8,500 $ 10,500 $ 11,500 Interest Yield, % 7.89 5.56 b. What generalization can you draw from the completed table? O Bond prices and interest rates are not related. O There is insufficient data to make a generalization. O Bond prices and interest rates are directly related. O Bond prices and interest rates are inversely related.
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $850. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price Interest Yield, % $ 8,500 8.95 S 10,500 $ 11,500 6.30 b. What generalization can you draw from the completed table? O There is insufficient data to make a generalization. O Bond prices and interest rates are not related. Bond prices and interest rates are inversely related. O Bond prices and interest rates are directly related.
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $700. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price Interest Yield, % $8,000 7.78 $10,000 $11,000 5.38 b. What generalization can you draw from the completed table? Bond prices and interest rates are directly related. Bond prices and interest rates are not related. Bond prices and interest rates are inversely related. There is insufficient data to make a generalization.
You own a bond with a coupon rate of 6.3 percent and a yield to call of 7.2 percent. The bond currently sells for $1,105. If the bond is callable in five years, what is the call premium of the bond? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Call premium
A bond has a Macaulay duration of 10.00 and is priced to yield 8.0%. If interest rates go up so that the yield goes to 8.5%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7.5%, what will be the bond's percentage change in price? Comment on your findings. If interest rates go up to 8.5%, the percentage change in the price of the bond is nothing%. (Round to two decimal places.) If interest rates go down to 7.5%, the percentage change in the price of the bond is nothing%. (Round to two decimal places.) Comment on your findings. (Select the best answer below.) A. As interest rates decrease, the price of the bond decreases. As interest rates increase, the price of the bond increases. B. As interest rates increase or decrease, the price of the bond will always increase. C. As interest rates increase or decrease, the price of the bond remains the same. D. As interest rates…
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $800. Compute and enter in the spaces provided in the accompanying table either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. What generalization can be drawn from the completed table?
QUESTION 7 As a recently hired analyst, you are tasked with evaluating your firm's bond portfolo, The first bond you evaluate has a constant payment of $427 per year and the prospectus claims the present value of the bond is $5,008. What is the Interest rate of the bond in question? Submit your answer in percent to the first decimal place, that is, 2.57% = 2.6 or 2.6%
The remarkable thing about the events described in the article is that the yield on the 3-month T-bill was briefly negative. To see how this could happen, consider the relationship between bond prices and bond yields. A 3-month T-bill with a maturity value of $1,000 is just a piece of paper that entitles the holder to $1,000 in three months. For example, if you were to buy a 3-month T-bill on September 24, 2008, with a maturity value of $1,000 and 90 days left to maturity, the U.S. government would pay you $1,000 on December 23, 2008. In general, the price of a bond is less than its maturity value. That is, if you are going to give up a certain amount of money for the duration of the bond, you expect to be paid for this loss of liquidity and compensated for inflation that could reduce the value of the repayment at the end of the period. Therefore, a piece of paper entitling you to $1,000 on December 23 would usually be worth less than $1,000 on September 24. The yield on a bond is a…
The price of a bond with no expiration date is originally $1,000 and has a fixed annual interest payment of $150. If the price of the bond then falls by $250, what will be the interest rate yield to a new buyer of the bond?
10. The bond has a 30-year maturity, an 8% coupon, and sells at an initial yield to maturity of 8%. Because the coupon rate equals yield to maturity, the bond sells at par value, or $1,000. The modified duration of the bond at its initial yield is 11.26 years, and its convexity is 212.4. If the bond's yield increases from 8% to 10%, the bond price will fall to $811.46, a decline of 18.85%. a. How does the price change according to the duration rule? b. How does the price change according to the duration-with-convexity rule?