Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Microeconomics Expert

Economics


Home >> Microeconomics

You buy a 3-year, 10% coupon bond with face value $1000 today. The market interest rate currently is 10% also.

a. What is the market price of the bond today?

b. You hold the bond for a year and sell it off a year later when the interest rate is 8%. What is the market price of the bond a year later?

c. What is your one period rate of return on the bond?

d. Without using a calculator, argue your way through to an answer to the following question. Suppose this had been a 5-year instead of a 3-year bond. Everything else about the bond remains the same. Would the one-period rate of return be higher or lower compared to your answer in c), if the interest rate fell to 8% next year?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91229778

Have any Question?


Related Questions in Microeconomics

Question consider an increase in the demand for petroleum

Question: Consider an increase in the demand for petroleum engineers in the United States. How would the supply of these engineers respond in the short run and in the long run? Conversely, consider a decrease in demand f ...

Question historically the value of the dollar has increased

Question: Historically, the value of the dollar has increased when the price of oil has risen, and declined when the price of oil has fallen. Explain why this has occurred, taking into account the fact that the US import ...

Question consider the aggregate demand-aggregate supply

Question: Consider the Aggregate Demand-Aggregate Supply framework. Suppose we are not in a liquidity trap (and do not end up in a liquidity trap), and the Fed does NOT target the interest rate. Show what happens if oil ...

Question on july 5 1884 dudley stephens and brooks - all

Question: On July 5, 1884, Dudley, Stephens, and Brooks - "all able-bodied English seamen" - and a teenage English boy were cast adrift in a lifeboat following a storm at sea. They had no water with them in the boat, and ...

Question fiscal measures may help a recessionary condition

Question: Fiscal measures may help a recessionary condition in the economy. Do you think we are moving towards a recessionary lag under the new administration? If yes, suggest measures to rectify the situation. If not, j ...

Question market demand is qd 400 - 10 price market supply

Question: Market demand is Qd = 400 - 10 Price; Market supply is Qs = 40 + 30 Price. Find the price elasticity of demand when Price = $30. The response must be typed, single spaced, must be in times new roman font (size ...

Question there are two goods in the economy anchovies a

Question: There are two goods in the economy, anchovies (a fish) and bananas (a farm product). Draw the economy's production possibilities before and after a natural disaster that lowers the banana harvest but does not a ...

Question one of the most fact-filled publications you can

Question: One of the most fact-filled publications you can buy is the Daily Racing Form. 72 For every horse running that day it contains about 30 facts about each of its last ten races, including the name of the jockey, ...

Question research the role of an administrator in contrast

Question: Research the role of an administrator in contrast to a non-management staff member in regards to risk management of an ADA (Americans With Disabilities Act) or workers' compensation incident in a typical health ...

Question a business equipment used for the manufacture of

Question: A business equipment used for the manufacture of commercial goods can be purchased for $30,000. This asset is expected to be sold after 4 years for $6,000. Compute the depreciation amounts every year (depreciat ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As

Follow Us

© Copyright 2013-14 mywordsolution.com All rights reserved