Explain why modified duration a better measure is than maturity when calculating the bond’s sensitivity to changes in interest rates?

Q: ) is a measure of the sensitivity of the price of a bond or other debt instrument to a change in…

A: Duration: Answer: 5.1 Formulas:

Q: If interest rates in the financial markets increase after a bond is issued, what will happen to the…

A: A bond is an instrument that represents the loan that is made by the investor to the company and…

Q: What is the relationship between bond prices and interest rates? Describe the process of…

A: Bond price: The present discounted value of a bond's future cash flow is known as the bond price.…

Q: hen interest rates.................., the market required rates of return....................., and…

A: Step 1 A fundamental principle of bond investing is that market interest rates and bond prices…

Q: What effect does collateral have on a bond's interest rate? What effect does subordination have on a…

A: There are various factors that impact a bond's price. We discount back the future cash flows of a…

Q: Make an example of bond valuation encompassing without change in the on going interest rate, and…

A: The bond price and the interest rates have an inverse relationship. The price of the bond falls when…

Q: If interest rates rise after a bond issue, what will happen to the bond’s price and YTM? Doesthe…

A: The bond's price and yield to maturity are directly affected by the increase in interest rates and…

Q: Duration is a measurement of a bond’s interest rate risk. It is also referred to as the…

A: Bond duration or duration of the bond means the price sensitivity of the bond when the interest rate…

Q: Illustrate the very important relationships between changes in interest rates and varying rates of…

A: It illustrates an inverse relationship amongst the change in the interest rate and the varying…

Q: Explain the difference between the unbiased expectations theory of the term structure of interest…

A: There are different theories that describe how the interest rates are set.

Q: The Macaulay duration is the: a. The bond's semi-elasticity of the price with respect to the…

A: Duration of bond is very important in deciding the bond as investment.

Q: If interest rates rise after a bond issue, what will happen to the bond’s price and YTM? Does the…

A: The corporation and government can raise finance by issuing bonds. The borrower i.e bond issuer is…

Q: initial measurement of a bond on its issuance

A: First option is wrong because initial measurement of bonds can be done by market quotation to fix…

Q: why modified duration is a better measure than maturity when calculating a bond’s sensitivity to…

A: Macaulay duration is the weighted average term of maturity of the cash flow generated through the…

Q: a bonds interest rate risk is lower if the bond has a _____ maturity and a ____ coupon rate

A:

Q: Distinguish between the Price Effect and the Re-Investment Effect of interest rate changes on a bond…

A: Bonds are the securities issued by the company for the purpose of arrangement of funds for the…

Q: Discuss how the duration of a bond's maturity affects the link between market interest rates and the…

A: This question explains about the duration of a bond's maturity affects the link between market…

Q: f the curvature in the relationship between bond prices and bond yields.

A: Macaulay duration of bond is weighted average no. of times fixed cash flows associated with bond…

Q: When interest rates __________, the market required rates of return ________, and the bond prices…

A: Because you have psoted multiple questions, we will answer the first question only, for the…

Q: Explain the difference between the coupon rate and the required return on a bond.

A: Coupon rate :  Coupon rate is the rate that is paid periodically. The coupon rate is the amount of…

Q: (                            ) is a measure of the sensitivity of the price of a bond or other debt…

A: Duration is measure of the sensitivity of the price of a bond or other debt instrument to change…

Q: What is the relationship between the PV and the market interest rate?  Does a lower market rate…

A: PV of a bond is computed using the concept of time value of money. Here the cash flows of a bond are…

Q: price of a long-term (longer-maturity) bond more or less sensitive to changes in interest rates than…

A: Long term bonds are more sensitive to change in interest rates than short term bond. If Interest…

Q: Is the price of a long term bond or the price of a short term security more sensitive to a change in…

A: Bond prices and interest rates are inversely related. A fall in interest rate increases the Bond…

Q: Which one of the following bond values will change when interest rates change? O The expected cash…

A: Value of a bond is the present value of the future cash flows discounted at a required rate of…

Q: Should the rate of return of a call option on a long-term Treasury bond be more or less sensitive to…

A: The financial contracts available which give the buyer the right to buy a stock or underlying asset…

Q: With regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity…

A: A bond's duration shows the measurement of the interest rate risk of the bond while bond convexity…

Q: Explain why an increase in the inflation rate will cause the yield to maturity on a bond to increase

A: Bond yield to maturity is the interest an investor earns by holding the bond till maturity.…

Q: Do you agree with the following statement? Explain why.“The information about a bond’s duration and…

A: Introduction: Bond is nothing but debt securities issued by a company or government if they want to…

Q: Discuss how the amount of time before a bond's maturity affects the link between market rates of…

A: This question explains about the amount of time before a bond's maturity affects the link between…

Q: The yield spread between two bond issues reflect more than just credit risk.  What other factors…

A: Bond refers to the securities in which an investor lends money to the government in exchange for…

Q: Money duration is the appropriate measure of interest rate risk for bonds with embedded options.…

A: A bond's money duration is a measurement of the bond's price change in reaction to a 1% change in…

Q: Which of the following is TRUE concerning the distinction between interest rates and returns? Select…

A: The Rate of return refers to a rate at which return is generated which is based on the initial…

Q: “Short-term interest rates are more volatile than long-term interest rates, soshort-term bond prices…

A: The short-term bond prices are fewer sensitive if associated with the prices of long-period bond to…