54) What am I doing wrong?? What is the Macaulay duration of a bond with a coupon of 5.4 percent, nine years to maturity,and a current price of $1,055.40? What is the modified duration? (Do not round intermediatecalculations. Round your answers to 3 decimal places.)Answer is complete but not entirely correct.DurationMacaulay7.082 X YearsModified7.410 X Years

Modified duration refers to the formula which is used to measure the change in the amount of…

Answered: is the modified duration? (Do not

Business

Finance

is the modified duration? (Do not

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 10P

See similar textbooks

Related questions

Q: A 3/1 ARM is made for $250,000 at 7 percent with a 30-year maturity. Fixed payments are to be made…

A: Adustable Rate Mortgage is a type of mortgage in which the interest rate on th ortgage remians fixed…

Q: Investing $19,000,000 in additional raw materials today, mostly in Uranium-235, should allow Teller…

A: Return on investment Return on investment is the net profit divided by total cost. It is calculated…

Q: The United States has a comparative advantage in -skilled lator. This explains why the U.S. is a net…

A: Skilled labor refers to workers who are highly trained, educated, or experienced and can do more…

Q: Option Trading Strategies - Two Assets $40 First Asset Profit Second Asset Profit Total Profit 1st…

A: In case of a Long put, Payoff is (exercise price - Stock price,0), I,e option is exercised only if…

Q: You are an inventor with a great business idea but no money. You have approached a venture…

A: Given: Investment by Venture Capitalist = $150 million Annual return = 40% forever but earnings for…

Q: . Mr. and Mrs. Ramirez have 4 children and have decided that they need a bigger house. They intend…

A: Loans are paid by the equal monthly installments payment in that there are payments for loans and…

Q: LMM Company’s total assets at the end of last year were P405,000 and its earnings before interest…

A: Total assets = P405,000 EBIT = P52,500

Q: You own a bond that has duration of 6 years. Interest rates are currently 7% but you believe the Fed…

A: Duration of the bond = 6 Years Current interest rate = 0.07 (i.e. 7 %) Predicted price change on…

Q: effective annual return on its consumer loans of 18.2 percent per year. The bank uses daily…

A: An investor earns interest on the amount invested. It is a fee paid to the investor for depositing…

Q: What would you pay for a bond that pays an annual coupon of $45, has a face value of $1,000, matures…

A: Face value of bond (FV) = $1000 Annual coupon amount (C) = $45 Years to maturity (n) = 11 Years…

Q: Suppose that the interest rate on Treasury bills is 6%, and every sale of bills costs P60. You pay…

A: Economic Order Quantity: The economic order quantity is the ordering level at which the storage…

Q: * EBIT is projected to equal P850 million. * Gross capital expenditures are expected to total to…

A: Increase in working capital is required to meet the targeted the free cash flow so company needs to…

Q: Two mutually exclusive investment altematives for implementing an office automation plan in an…

A: Incremental IRR analysis It is an analysis of the return over venture finished with an intend to…

Q: There are two breakpoints in NCC's capital structure. At what point does the first breakpoint occur?

A: first break even point = bond amount / percentage

Q: 1. How much would the effective cost of the borrowing to ABC after the swap? 2. Assuming that the…

A: Interest rate swaps can be defined as forward contracts where fixed interest rate is exchanged for…

Q: Inn Corporation had 30,000 ordinary shares of which were acquired during Year 2 for a total…

A: Answer - December 31, Year 2 ledger balance (30,000 x P65) P1,950,000 Cost…

Q: Comment on the following statement. The reason we are seeing fewer market-creating innovations is…

A: The process by which a company evaluates potential big projects or investments is known as capital…

Q: Lobster Seafood Corp. is planning to build a new shipping depot. The initial cost of the investment…

A: The cost of capital is the amount of return that the company pays for its capital. The net present…

Q: Use the information below provided by Angel Baby Angel Company: Sales 8,250,000.00 Operating…

A: Data given: Net operating profit =$ 3,525,000.00 Tax rate = 40% Interest expense=$ 1,750,000.00 WACC…

Q: he regular financial statements in which every line has been divided by the sales for the year.…

A: For comparison of financial statement of different companies some common form is required to compare…

Q: A firm has a market value equal to its book value, excess cash of $1,000, and equity worth $20,800.…

A: Excess cash = $1000 Existing number of shares = 6000 Market value = $20,800 Price per share = Market…

Q: Refer to the table below to answer one question. Interest Rate Option March 2020 Cash 0.00% Checking…

A: Money can be held or can be invested in different investment vehicles or in different types of…

Q: Assuming that money is worth 10%, compute the present value of: 1. $14,000 received 15 years from…

A: Present Value: It represents the present worth of the future amount and is computed by discounting…

Q: 20. Ron and Sandy have purchased their first house. They borrowed $174, 000 for 30 years at an…

A: Solution:- Total monthly payment will be the total payment made towards the monthly mortgage…

Q: se your own word to explain the spot versus Futures prices. a. what is Backwardation b. What is…

A: The spot prices and future prices may be in upward trend or may be in downward trend and depending…

Q: The following financial information was provided by Anya Company: Net Income 8,255,000.00…

A: Depreciation A depreciation is a non-cash expenses for the company. The depreciation expenses is…

Q: Suppose you sold stock XYZ December RM8 call options for40 sen. The price of XYZ stock on the day of…

A: Call options can be defined as the trading strategy which gives the right to purchase the underlying…

Q: Assume a stock has the following: Price today is $250 annual dividend of $3 Beta = 1.25 If you…

A: Last dividend = $3 Growth rate = 0.03 Discount rate = 0.0425 Fair value of stock = ?

Q: The following financial information was provided by Anya Company: Net Income 8,255,000.00…

A: Given, Net income is 8,255,000 Tax rate is 35%

Q: NAV = $40/share but will change if the market price of the stocks change

A: A mutual fund refers to the pool of money where the public invests their money and that money is…

Q: Discuss different financing alternatives based on the processing industry and market using Private…

A: The US Small Business Administration defines it as “financial support from external sources other…

Q: 9. Assume today's settlement price on a CME EUR futures contract is $1.3140/EUR. You have a short…

A: Short position - It implies that the bond account will incur loss if settlement prices rise and…

Q: When all else is equal, interest rate risk is smaller wit

A: interest rate risk increases with longer maturity , decreases with shorter maturity.

Q: ). Using the net present value method, which project should be accepted? (b). Using the internal…

A: We will use the different capital budgeting tools here. Mainly we will use NPV and IRR.

Q: Assume you have a brand new nephew in the family and you want to contribute to the child's college…

A: A bond is a debt instrument that is used to raise capital. It differs from loans as they can be…

Q: Consider the following Call Option: June 80 trading at $4.25/share June is the expiration 80 is…

A: Call option would give holders of option to buy stock on expiration but no obligation to do that…

Q: t is the interest rate that the buyer will actually earn if the bond is held to maturity and there…

A: Bond carry the payment of coupon periodically and payment of face value on the maturity of bond and…

Q: Show your solution 1. For each of the following Treasury Bills, calculate the discount basis yield…

A: Here, Formula of Discount Yield and Investment Yield is as follows: Discount Yield=Face Value-…

Q: The credit card with the transactions described in the popup below uses the average daily balance…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: You deposit $3500 in an account earning 2% interest compounded quarterly. How much will you have in…

A: Deposit amount (P) = $3500 Interest rate = 2% Quarterly interest rate (r) = 2%/4 = 0.50% Period = 18…

Q: part C D QUESTION 1. You are a financial analyst reviewing the draft financial statements of…

A: Ratio Analysis: It is a well known procedure of financial analysis and is utilized to envision and…

Q: Consider a call and a put options with the same strike price and time to expiry. Given that the…

A: The put-call parity: When the strike price on an underlying asset and the time to expiry are the…

Q: Saki Sushi Restaurant has 250,000 shares of stock outstanding, $400,000 in perpetual after-tax EBIT,…

A: Number of shares = 250,000 Initial project cost = $360,000 Annual perpetual after tax EBIT = $60,000…

Q: Stock A has an expected return of 12% and a standard deviation of 35%. Stock B has an expected…

A: Expected return on portfolio is the weighted average return on stocks in the portfolio and can be…

Q: A non-dividend-paying stock has a current price of 800 ngwee. In any unit of time (t, t + 1) the…

A: Given, (a) (u )= 25% Increase in % = 1 + 25% = 1.25 d = 20% Decrease % = 1 - 20% = 0.80 R = 1.04 Up…

Q: On October 1, 2010, EEE Inc. issued, at 101 plus accrued interest, 800 of its 10 percent, P1,000…

A: In the given case - P1000 Bonds are dated 1st July-2010. The bonds are issued on 1st October-2010…

Q: When coupon payment is expressed as a percentage of the bond’s par value and annualized by…

A: Coupons are the annual interest rates paid on a bond. It is usually expressed as a percentage of the…

Q: Five years ago, a piece of equipment was purchased at a cost of $170,000, with a salvage value of…

A: The existing equipment is 5 years old and remaining life of such equipment is 10 years more. The new…

Q: a P5,000,000 loan to be credited to ABC on May 1, 2022. The prevailing interest rate on Jan. 31 was…

A: Forward rate agreements(FRA) are interest rate derivatives. This is an instrument used by…

Q: Option Payoffs and Profits 540 s20 Option Pey Option ro Eerce Pre s20 S40 $10 $20 $10 $40 $50 se0…

A: In case of a Long put, Payoff is (exercise price - Stock price,0), I,e option is exercised only if…

Question

54) What am I doing wrong??

What is the Macaulay duration of a bond with a coupon of 5.4 percent, nine years to maturity,
and a current price of $1,055.40? What is the modified duration? (Do not round intermediate
calculations. Round your answers to 3 decimal places.)
Answer is complete but not entirely correct.
Duration
Macaulay
7.082 X Years
Modified
7.410 X Years

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for 1,135.90, producing a nominal yield to maturity of 8%. However, the bond can be called after 5 years for a price of 1,050. (1) What is the bonds nominal yield to call (YTC)? (2) If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?
Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may be called in 4 years at a call price of 1,060. The bond sells for 1,100. (Assume that the bond has just been issued.) a. What is the bonds yield to maturity? b. What is the bonds current yield? c. What is the bonds capital gain or loss yield? d. What is the bonds yield to call?
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.)
Yield to Maturity and Yield to Call Arnot International’s bonds have a current market price of $1,200. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (call price = $1,090). What is the yield to maturity? What is the yield to call if they are called in 5 years? Which yield might investors expect to earn on these bonds, and why? The bond’s indenture indicates that the call provision gives the firm the right to call them at the end of each year beginning in Year 5. In Year 5, they may be called at 109% of face value, but in each of the next 4 years the call percentage will decline by 1 percentage point. Thus, in Year 6 they may be called at 108% of face value, in Year 7 they may be called at 107% of face value, and so on. If the yield curve is horizontal and interest rates remain at their current level, when is the latest that investors might expect the firm to call the bonds?
Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of 1,000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%; the other bond, Bond Z, is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, what will be the price of each of the bonds at the following time periods? Fill in the following table: