An asset in the market is priced at 12,750 with an annual effective yield rate of 4.5%. The modified duration of the asset is Y. Garen uses the first-order Macaulay approximation to estimate the price of the asset if the yield rate were to decrease by 200 basis points. The result is 15,550. Calculate Y.

An asset in the market is priced at 12,750 with an annual effective yield rate of 4.5%. The modified duration of the asset is Y. Garen uses the first-order Macaulay approximation to estimate the price of the asset if the yield rate were to decrease by 200 basis points. The result is 15,550. Calculate Y.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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An investment pays $1000 in two years and $3000 at the end of the fifth year. It is priced to yield an annual effective rate of 7.5%. Find the price, Macaulay duration, modified duration and convexitv Estimate the price if the interest rate changes to 7.4% using modified duration.
The ordered pairs (0 , 5000) and (10 , 13591.41) represent the value of an investment at two different times: When the investment was made, and 10 years later. Let f(t), where t is time in years, be the linear function so that the above points lie on its graph. Then, using f(t), the value of the investment after 12 years is R_______ 1. Fill in the blank, If the interest rate for the investment is 10% per annum, compounded continuously, then the absolute error in approximating the value of the investment after 12 years with f(t) is R____ Fill in the blank
with end of the month contributions of 251.33 a tsfa is expected to pass 90000 in value after 15 years and 5 months. determine the nominal rate and effective rates of return used in the projection. Round to the nearest 0.01. Must show work
Use a calculator to evaluate the amortization formula for the values of the variables P, r, and t (respectively). Assume n = 12. (Round your answer to the nearest cent.) $14,000; 5%; 4 yr
An investment earns 7% the first year, earns 12% the second year, and loses 10% the third year. The geometric average return over the three years was ________ Select one: a. 9.65% b. 2.55% c. 3% d. 3.59% e. 9.67%
A firm is considering two alternatives that have no salvage value. At the end of 4 years, another B may be purchased with the same cost, benefits and so forth. a. Construct a choice table for interest rates from 0% to 100%. b. If the MARR is 10%, which alternative should be selected? Item Initial Cost Uniform Annual Benefits Useful Life, in years A -$10,700 2,100 8 B -$5,500 1,800 4
Solve c) What is the payback period (PB) for this project?
Tom Thompson expects to invest $18,000 at 9% and, at the end of a certain period, receive $92,551. How many years will it be before Thompson receives the payment? (PV of $1. FV of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Future Value $ 92,551 Present Value $ 18,000 = Table Factor Years years
Use a calculator to evaluate the amortization formula for the values of the variables P, r, and t (respectively). Assume n = 12. (Round your answer to the nearest cent.) $150,000; 9%; 25 yr
Find the Payback period for Oman Lighting company if the initial investment is 12000 OMR and the cash Inflows are as follows: Year 1 =3250 OMR; Year 2 =3500 OMR; Year 3=3750 OMR and Year 4=4000 OMR. Select one: a. None of the options b. 3 years 4 months c. 2 years 8 months d. 1 year 10 months e. 3 years
Determine which alternative, if any, should be chosen based on Annual Worth method using 15% MARR. Use Repeatability Method. Note: Show final answer to the nearest WHOLE NUMBER and show complete solution Answer the following: a. The Annual Worth of Alternative A is = $ Blank 1 b. The Annual Worth of Alternative B is = $ Blank 2 c. Choose Alternative (Type only A or B) = Blank 3
Find the Payback period for Oman Lighting company if the initial investment is 12000 OMR and the cash Inflows are as follows: Year 1 =3250 OMR; Year 2 =3500 OMR; Year 3=3750 OMR and Year 4=4000 OMR. Select one: O a. 1 year 10 months O b. 3 years 4 months O c. 2 years 8 months O d. 3 years O e. None of the options

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