Question
In: Finance
US government issued a railroad perpetual bond that pays $100 every year forever. However the interest...
US government issued a railroad perpetual bond that pays $100 every year forever. However the interest rate fluctuates a lot, and you want to know the impact of interest rate on price of the bond. Consider interest rates range between 1% and 20% with 1% incremental step. Plot the relationship between interest rate and price of the perpetual bond in Excel, and clearly state the relationship.
Note: plot interest rate in X axis, and price in Y axis. Note that in Excel, you put interest rates in one column, and prices in another column, then select these two, and click insert graph. You might have to right click the graph to choose what is displayed on X axis.
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jeff jeffy answered 2 years agoRelated Solutions
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(Please provide a well detailed answer with the equations used
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There is a bond that pays $100 per year interest, with a $1,000
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comparable bond increase to 15%? What if it decreases to 8%.
Explain the above questions (part b) with the concepts of interest
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There is a bond that pays $100 per year interest, with a $1,000 par value. It...
There is a bond that pays $100 per year interest, with a $1,000
par value. It matures in 15 years. The market required yield to
maturity on a comparable bond is 12%.
What is the value of the bond?
How does the value change if the yield to maturity on a
comparable bond increase to 15%? What if it decreases to 8%.
Explain the above questions (part b) with the concepts of
interest rate risk, premium bonds and discount bonds....
What is the present value of an investment that pays $200 every other year forever if...
What is the present value of an investment that pays
$200 every other year forever if the first cash flow occurs in two
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Question 4: There is a bond that pays $100 per year interest, with a $1,000 par...
Question 4: There is a bond that pays
$100 per year interest, with a $1,000 par value. It matures in 15
years. The market required yield to maturity on a comparable bond
is 12%.
What is the value of the bond?
How does the value change if the yield to maturity on a
comparable bond increase to 15%? What if it decreases to 8%.
Explain the above questions (part b) with the concepts of
interest rate risk, premium bonds and...
ACC Company issued a 10-year, 8%, $1,000,000 bond on Jan 1, 2009. The bond pays interest...
ACC Company issued a 10-year, 8%, $1,000,000 bond on Jan 1,
2009. The bond pays interest every December 31, with the principal
to be paid at the end of 10 years. The market interest rate
(effective interest rate) on Jan 1, 2009 was 5%. The market
interest rate on December 31,2012 was 4%. (1) Compute the Book
value of bonds liability on January 1, 2012. (2) Record the journal
entry about interest expense on December 31, 2012.
An investment pays $15,000 every other year forever with the first payment one year from today....
An investment pays $15,000 every other year forever
with the first payment one year from today.
a.
What is the value today if the discount rate is 8 percent
compounded daily? (Use 365 days a year. Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
b.
What is the value today if the first payment occurs four years
from today? (Use 365 days a year. Do not round intermediate
calculations and round your answer...
7. Pat pays $10,000 for a newly issued two-year government bond with a $10,000 face value...
7. Pat pays $10,000 for a newly issued two-year government bond
with a $10,000 face value and a 6 percent coupon rate. One year
later, after receiving the first coupon payment, Pat sells the
bond. If the current one-year interest rate on government bonds is
5 percent, then the price Pat receives is:
A. $10,000.
B. $500.
C. greater than $10,000.
D. less than $10,000.
8. Sydney purchases a newly-issued, two-year government bond
with a principal amount of $10,000 and...
Consider an investment that costs $400 and pays $100 per year forever. What is the payback...
Consider an investment that costs $400 and pays $100 per year
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rate of return is 10 percent with, how much should you be willing
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