Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. an investor has two bonds in his portfolio that ha

An investor has two bonds in his portfolio that have a face value of $1,000...

80.2K

Verified Solution

Question

Finance

An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual coupon. Bond L matures in 16 years, while Bond S matures in 1 year.

  1. What will the value of the Bond L be if the going interest rate is 7%, 9%, and 12%? Assume that only one more interest payment is to be made on Bond S at its maturity and that 16 more payments are to be made on Bond L. Round your answers to the nearest cent.

    7% 9% 12%
    Bond L $ $ $
    Bond S $ $ $

  2. Why does the longer-term bonds price vary more than the price of the shorter-term bond when interest rates change?

    1. Long-term bonds have lower reinvestment rate risk than do short-term bonds.
    2. The change in price due to a change in the required rate of return increases as a bond's maturity decreases.
    3. Long-term bonds have greater interest rate risk than do short-term bonds.
    4. The change in price due to a change in the required rate of return decreases as a bond's maturity increases.
    5. Long-term bonds have lower interest rate risk than do short-term bonds.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Programming
1.2K views

(Python3) Write a function friend_besties() that calculates the \"besties\" (i.e. degree-one friends) of a given individual in...

Physics
1.2K views

A radioactive nucleus decay as follows X X X if the atomic number and the...

Basic Math
1.2K views

fold along this edge and staple I can evaluate 0000000 37 53 12 5 0

Basic Math
1.2K views

The total points scored by two youth soccer teams are shown.Rockets: 3, 0, 3, 4,...

Accounting
1.2K views

though there are no signs usa will be fully adopting ifrs any time soon, there...

Accounting
1.2K views

Climb Climate Control Inc. manufactures a variety of heating and air-conditioning units....

Accounting
1.2K views

Singh and Smythe is an architectural firm that provides services for residential construction projects. The...

Accounting
1.2K views

Business Course Return to course My Subscrip! Developing a Master Budget for a Merchandising Organization...

Accounting
1.2K views

Problem 4 - Factory Overhead Volume Variance Bellingham Company produced 3,900 units of product that...

Accounting
1.2K views

Presented here are selected transactions for Oriole Limited for 2021. Oriole uses straight-line depreciation and...

Accounting
1.2K views

Milestone 4: scheduler.cpp #include #include "scheduler.hpp" void Course::display() const { std::string start_leading; std::string end_leading; int...

Finance
1.2K views

Explain the difference between Resident, Non-Resident, Deemed resident and part-year resident individual with the tax...