According to the lecture, the bond is fixed but has uncertainties. Could you explain this contradiction?

Expert Solution

1- Bonds are generally of long term maturities ranging 5-30 years hence they carry the risk of uncertainty that is, credit risk, probability of default in future.

2- Change in market yield can cause a change in the price of bond i.e increase in yield decrease the price of bond , vice versa.

3-Rating related risk as if Rating decrease than bond will be discounted with higher rate hence decrease the price of the bond.

4-Economic condition of the country or the particular sector also decides the spread on bond with which it would be discounted resulting in the change of price of a bond. for eg. increase in spread due to depression in particular sector would increase the discounting rate due to which there will be decrease in the price of bond .

Hence we can say that bond is fixed but have uncertainty of default or risk related to change in price because of following above reason.

jeff jeffy answered 1 year ago

The lecture told us regarding the stock valuation. Could you explain what the practical problems in...

The lecture told us regarding the stock valuation. Could you explain what the practical problems in the stock valuation are?

According to Stuart Hall’s lecture “Race, The Floating Signifier,” race discourse has been used as a...

According to Stuart Hall’s lecture “Race, The Floating Signifier,” race discourse has been used as a way of stabilizing culture. Hall specifically discusses “matter out of place” to illustrate the workings of classification as a system of power. Offer examples (from Stuart Hall, our class discussions, out of class experiences, etc.) that demonstrate how race discourse has perpetuated/maintained the “order” in our culture (in respect to race, intelligence, merit, ability, etc.).

COULD YOU PRETTY PLEASE show this in WORKING NOT EXCEL 5. A bond has maturity of...

COULD YOU PRETTY PLEASE show this in WORKING NOT EXCEL 5. A bond has maturity of 7 years and pays a 7% coupon rate (with coupon paid annually).The bond sells at par value. (1) Calculate the duration and convexity of the bond. 2 (2) Assuming its yield to maturity increases from 7% to 8% with maturity unchanged. Calculate the predicted price using modified duration rule, and the percentage error of this rule. (3) Assuming its yield to maturity increases from...

4. Explain how each of the following procedures could be used in the audit of fixed...

4. Explain how each of the following procedures could be used in the audit of fixed assets, e.g., various types of equipment used in the business. Organize your answer as follows: Procedure Audit Test performed Assertion(s) tested Observation Physical examination Inquiry Confirmation Examination of documents Recomputation Vouching Analytical procedures 5. Businesses often have litigation against them that the auditor has to identify and adequately disclose. List the financial assertions that apply to Contingencies. For each assertion indicate two or...

Suppose that you could buy a one-year bond today, which has an interest rate of 3%....

Suppose that you could buy a one-year bond today, which has an interest rate of 3%. If you wait a year and buy a one-year bond then, the interest rate will be 4%. Two years from now, a one-year bond is expected to offer an interest rate of 5%. According to the expectations theory of the term structure of interest rates, what is the interest rate on a two-year bond today? What is the interest rate on a three-year bond...

Convertible bond vs straight fixed-rate bond. Which bond has a higher demand, higher risk, and price...

Convertible bond vs straight fixed-rate bond. Which bond has a higher demand, higher risk, and price ceteris paribus.

According to Moody’s Bond rating, a high-quality bond with low investment risk has the following rating:...

According to Moody’s Bond rating, a high-quality bond with low investment risk has the following rating: a. Aaa b. Daa c. Baa d. Caa

could you explain in details the research oinion?

Could you explain the economic impacts of Coronavirus?

Explain you reasoning for this opinion, using where possible information from the module lecture/slides

Module 11 Cooperative Procurement & Shared Services Assignment In this module we examined Co-operative Procurement and Shared Services. Your assignment is to provide your opinion on whether or not you feel that these models of procurement are good, bad or indifferent. Explain you reasoning for this opinion, using where possible information from the module lecture/slides

Question