a. If interest rates suddenly rise by 1.4 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Answer is complete but not entirely correct. %A in Price Bond A -8.01 % Bond B -11.54 % b. If interest rates suddenly fall by 1.4 percent instead, what would be the percentage change in price of Bond A and Bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) X Answer is complete but not entirely correct. %A in Price Bond A 8.97 X % Bond B 13.69 %

a. If interest rates suddenly rise by 1.4 percent, what is the percentage change in price of Bond A and Bond B? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Answer is complete but not entirely correct. %A in Price Bond A -8.01 % Bond B -11.54 % b. If interest rates suddenly fall by 1.4 percent instead, what would be the percentage change in price of Bond A and Bond B? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) X Answer is complete but not entirely correct. %A in Price Bond A 8.97 X % Bond B 13.69 %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 10P

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Similar questions

What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond? What would happen to the bond’s value if inflation fell and rd declined to 7%? Would we now have a premium or a discount bond? What would happen to the value of the 10-year bond over time if the required rate of return remained at 13%? If it remained at 7%? (Hint: With a financial calculator, enter PMT, I/YR, FV, and N, and then change N to see what happens to the PV as the bond approaches maturity.)
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Suppose that you buy a 1-year maturity bond with a coupon of 7% paid annually. If you buy the bond at its face value, what real rate of return will you earn if the inflation rate is 4%? 6%? 8%? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.)
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