Explore BrainMass

Explore BrainMass

    Cash flows - Calculating the present value of bonds

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What are the cash flows associated with calculating the present value of bonds? What happens to the value of bonds when interest rates increase? Explain why this happens? What happens to the value of bonds when interest rates decrease? Explain why this happens? What impact does the number of years until maturity have on the value of a bond? (include references)

    Example: a 5 year to maturity bond has a coupon of 7% and is trading at par. What will happen to the bond if the rates on similar bonds increase by 100 basis points?

    © BrainMass Inc. brainmass.com June 3, 2020, 7:30 pm ad1c9bdddf
    https://brainmass.com/business/statement-of-cash-flows/cash-flows-calculating-the-present-value-of-bonds-101619

    Solution Preview

    What are the cash flows associated with calculating the present value of bonds? What happens to the value of bonds when interest rates increase? Explain why this happens? What happens to the value of bonds when interest rates decrease? Explain why this happens? What impact does the number of years until maturity have on the value of a bond? (include references)

    Example: a 5 year to maturity bond has a coupon of 7% and is trading at par. What will happen to the bond if the rates on similar bonds increase by 100 basis points?

    In ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer the request of the assignment of more than 300 words of text.

    $2.19

    ADVERTISEMENT