Business, 24.07.2020 18:01 jynaepooh

A bond currently has a price of $1,050. The yield on the bond is 7%. If the yield increases 23 basis points, the price of the bond will go down to $1,037. The duration of this bond is years.

Answers: 2

Show answers

Answers

Answer from: zairam2002

The duration of the bond is 5.8 years

Explanation:

Given that :

Current price of a bond $1,050

Yield on the bond = 7% = 0.07

If the yield increases 23 basis points, the price of the bond will go down to $1,037

The objective is to determine the duration of the bond.

In order to determine the duration of the bond; we need to first find the change in percentage of the price. Afterwards, this is find the modified duration which quantify the change in percentage in the market price for every change in the yield to maturity. Then finally to the determination of the duration of the bond.

Mathematically;

Percentage change in price = $\dfrac{new \ price - old \ price }{old \ price}$

Percentage change in price = $\dfrac{1037 - 1050 }{1050}$

Percentage change in price = $\dfrac{-13 }{1050}$

Percentage change in price = −0.01238

Percentage change in price ≅ - 0.0124

Percentage change in price = - 1.24%

Let recall from the knowledge of our basis points which say;

1 basis point = 1/100

Therefore ; given that if he yield increases 23 basis points, then we have:

23 basis point = 23/100 = 0.23

The modified duration = $\dfrac{percentage \ change \ in \ price }{ change}$

The modified duration = $\dfrac{1.24 }{0.23}$

The modified duration = 5.3913 years

Finally, The duration of the bond = Modified duration × (1 + Yield to Maturity)

The duration of the bond = 5.3913 × (1 + 0.07)

The duration of the bond = 5.3913 × 1.07

The duration of the bond = 5.768691 years

The duration of the bond ≅ 5.8 years

Answer from: Quest

Some disadvantages to leasing a car is that you are counting on someone to give you money every week or month depending on what you decided and if they don't have all of it well what if you needed that money now you as well have to pay not in full. a disadvantages to purchasing a new vehicle is if it is used then not all the time will absolutely everything work. its almost like a trail and era. although if it is a new car they will try to though all these specials and deals at you in your lease and it can be very overwhelming if you are not use to it.

Answer from: Quest

What's the rest of the problem? lol

Another question on Business

Business, 22.06.2019 11:20

Camilo is a self-employed roofer. he reported a profit of $30,000 on his schedule c. he had other taxable income of $5,000. he paid $3,000 for hospitalization insurance. his self-employment tax was $4,656. he paid his former wife $4,000 in court-ordered alimony and $4,000 in child support. what is the amount camilo can deduct in arriving at adjusted gross income (agi)?

Answers: 2

Answer

Business, 22.06.2019 13:40

The cook corporation has two divisions--east and west. the divisions have the following revenues and expenses: east west sales $ 603,000 $ 506,000 variable costs 231,000 300,000 traceable fixed costs 151,500 192,000 allocated common corporate costs 128,600 156,000 net operating income (loss) $ 91,900 $ (142,000 ) the management of cook is considering the elimination of the west division. if the west division were eliminated, its traceable fixed costs could be avoided. total common corporate costs would be unaffected by this decision. given these data, the elimination of the west division would result in an overall company net operating income (loss)

Answers: 1

Answer

Business, 22.06.2019 20:00

Which of the following statements is true of the balanced-scorecard? a. it is a more or less a one-dimensional metric of measuring competitive advantages of a firm. b. it is one of the traditional approaches of measuring firm performance. c. its primary focus is to base a firm's strategic goals entirely on external performance dimensions. d. it attempts to provide a holistic perspective on firm performance.

Answers: 1

Answer

Business, 22.06.2019 22:00

Anheuser-busch inbev is considering you for an entry-level brand management position. you have been asked to prepare an analysis of the u.s. craft beer industry as part of the selection process. prepare a 3-5 page report that includes a description of the industry’s strategically relevant macro-environmental components, evaluates competition in the industry, assesses drivers of change and industry dynamics, and lists industry key success factors. the company’s management also asks that you propose the basic elements of a strategic action plan that will allow the company to improve its competitive position in the market for craft beer. you must provide a heading in your report for each of the required elements of the assignment.

Answers: 3

Answer

You know the right answer?

A bond currently has a price of $1,050. The yield on the bond is 7%. If the yield increases 23 basis...

Questions