Bond values
Not what you're looking for?
The Heymann company's bonds have 4 years remaining to maturity. Interest is paid annually; the bonds have a $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S a maturity of 1 year.
a/ What will be the value of each of these bonds when the going rate of interest is (1) 5 percent, (2) 8 %, and (3) 12 %. Assume that there is only one more interest payment to be made on Bond S.
b. Why does the longer term (15 year) bond fluctuate more when interest rates change than does the shorter-term bonds (1 year)?
Purchase this Solution
Solution Summary
This is a pair of bond value questions.
Solution Preview
a/ (see doc for for more information)
Formulas
S bond
$1000 = (1 + interest/100)*(initial value)
initial value = $1000/(1 + interest/100)
L bond
Year1 = (1 + interest/100)*(initial value)
Year2 = (1 + interest/100)*Year1 = (1 + ...
Purchase this Solution
Free BrainMass Quizzes
Operations Management
This quiz tests a student's knowledge about Operations Management
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.