Questions from General Investment

Q: Using annual compounding, find the yield to maturity for each of

Using annual compounding, find the yield to maturity for each of the following bonds. a. A 9.75%, 18-year bond priced at $962.41 b. A 14%, 20-year bond priced at $1,612.98 c. A 6.25%, 15-year bond pri...

Q: A bond has a Macaulay duration equal to 9.8 and

A bond has a Macaulay duration equal to 9.8 and a yield to maturity of 8%. What is the modified duration of this bond?

Q: Two bonds have par values of $1,000. One

Two bonds have par values of $1,000. One is a 6%, 20-year bond priced to yield 7%. The other is an 8%, 25-year bond priced to yield 5%. Which of these has the lower price? (Assume annual compounding i...

Q: A bond has a Macaulay duration of 8.24 and is

A bond has a Macaulay duration of 8.24 and is priced to yield 7%. If interest rates go up so that the yield goes to 7.5%, what will be the percentage change in the price of the bond? Now, if the yield...

Q: An investor wants to find the duration of a 25-year

An investor wants to find the duration of a 25-year, 6% semiannual-pay, noncallable bond that’s currently priced in the market at $882.72 to yield 7%. Using a 50 basis point change in yield, find the...

Q: Find the Macaulay duration and the modified duration of a 15-

Find the Macaulay duration and the modified duration of a 15-year, 9% corporate bond priced to yield 7%. According to the modified duration of this bond, how much of a price change would this bond inc...

Q: Sharnel Bitker expected the price of PharmaScripts shares to drop in the

Sharnel Bitker expected the price of PharmaScripts shares to drop in the near future in response to the expected failure of its new drug to pass FDA tests. As a result, she sold short 1,000 shares of...

Q: Which one of the following bonds would you select if you thought

Which one of the following bonds would you select if you thought market interest rates were going to fall by 50 basis points over the next six months? a. A bond with a Macaulay duration of 8.36 years...

Q: Stacy Picone is an aggressive bond trader who likes to speculate on

Stacy Picone is an aggressive bond trader who likes to speculate on interest rate swings. Market interest rates are currently at 9%, but she expects them to fall to 7% within a year. As a result, Stac...

Q: Elliot Karlin is a 35-year-old bank executive who

Elliot Karlin is a 35-year-old bank executive who has just inherited a large sum of money. Having spent several years in the bank’s investments department, he’s well aware of the concept of duration a...