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1. Suppose the interest rate decreases to 9% as an annual percentage rate. and durations of the two bonds in the table below? 8% coupon bond (1) Period 1 2 3 4 (2) Time until Payment (years) 0.5 1.0 1.5 2.0 (3) Cash Flow 40 40 40 1,040 Column Sums (4) PV of CF (Discount rate= 5%) 38.095 36.281 34.554 855.611 964.541 What will happen to the prices (5) Weight 0.0395 0.0376 0.0358 0.8871 1.0000 (6) Column (2) X Column (5) 0.0197 0.0376 0.0537 1.7741 1.8852

1. Suppose the interest rate decreases to 9% as an annual percentage rate. and durations of the two bonds in the table below? 8% coupon bond (1) Period 1 2 3 4 (2) Time until Payment (years) 0.5 1.0 1.5 2.0 (3) Cash Flow 40 40 40 1,040 Column Sums (4) PV of CF (Discount rate= 5%) 38.095 36.281 34.554 855.611 964.541 What will happen to the prices (5) Weight 0.0395 0.0376 0.0358 0.8871 1.0000 (6) Column (2) X Column (5) 0.0197 0.0376 0.0537 1.7741 1.8852

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1. Suppose the interest rate decreases to 9% as an annual percentage rate. What will happen to the prices and durations of the two bonds in the table below? 8% coupon bond (1) Period 1 2 3 4 (2) Time until Payment (years) 0.5 1.0 1.5 2.0 (3) Cash Flow 40 40 40 1,040 Column Sums. (4) PV of CF (Discount rate - 5%) 38.095 36.281 34.554 855.611 964.541 (5) Weight 0.0395 0.0376 0.0358 0.8871 1.0000 (6) Column (2) X Column (5) 0.0197 0.0376 0.0537 1.7741 1.8852
Transcribed Image Text:1. Suppose the interest rate decreases to 9% as an annual percentage rate. What will happen to the prices and durations of the two bonds in the table below? 8% coupon bond (1) Period 1 2 3 4 (2) Time until Payment (years) 0.5 1.0 1.5 2.0 (3) Cash Flow 40 40 40 1,040 Column Sums. (4) PV of CF (Discount rate - 5%) 38.095 36.281 34.554 855.611 964.541 (5) Weight 0.0395 0.0376 0.0358 0.8871 1.0000 (6) Column (2) X Column (5) 0.0197 0.0376 0.0537 1.7741 1.8852
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