11. Problem 11 Bond A pays $4,000 in 20 years. Bond B pays $4,000 in 10 years. (To keep things simple, assume these are zero-coupon bonds, which means the $4,000 is the only payment the bondholder receives.) Suppose the interest rate is 7 percent. Using the rule of 70, the value of Bond A is approximately ,and the value of Bond B is approximately Now suppose the interest rate increases to 14 percent. Using the rule of 70, the value of Bond A is now approximately v , and the value of Bond 8 is approximately Comparing each bond's value at 7 percent versus 14 percent, Bond A's value decreases by a percentage than Bond Bs value. The value of a bond when the interest rate increases, and bonds with a longer time to maturity are v sensitive to changes in the interest rate.

11. Problem 11 Bond A pays $4,000 in 20 years. Bond B pays $4,000 in 10 years. (To keep things simple, assume these are zero-coupon bonds, which means the $4,000 is the only payment the bondholder receives.) Suppose the interest rate is 7 percent. Using the rule of 70, the value of Bond A is approximately ,and the value of Bond B is approximately Now suppose the interest rate increases to 14 percent. Using the rule of 70, the value of Bond A is now approximately v , and the value of Bond 8 is approximately Comparing each bond's value at 7 percent versus 14 percent, Bond A's value decreases by a percentage than Bond Bs value. The value of a bond when the interest rate increases, and bonds with a longer time to maturity are v sensitive to changes in the interest rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Figure A Q Figure B Figure C Price (dollars per unit) 15, 14- 13- 12- 11- 10- Price (dollars per…

A: In a perfectly competitive market, there are large number of firms producing similar and identical…

Q: of oil would make 15 million barrels the optimal quantity to extract and sell

A: At price 90 oil would make 20 million barrels the optimal quantity to extract and sell this year.

Q: 5.6 Show What You Know - Buying vs Leasing A Vehicle /22 1. Tyler is a contractor in Winnipeg and…

A: Since you have posted a question with multiple subparts, we will answer the first three subparts for…

Q: need the anwser asap. thank you

A: b. Consumer surplus:Consumer surplus is the difference between the price consumers are willing to…

Q: Question 8 Assume that Derryland and Whetonia can switch between producing cheese and producing…

A: Opportunity Cost: It refers to the foregone revenue on the next best alternative if we pick a…

Q: What is the highest price consumers would be willing to pay for this product? Also called the…

A: Total revenue is the total value of the commodities produced and sold in equilibrium. Economic costs…

Q: There is a bar on Off‐Main Street called the Rock‐n‐Roll Bar. All the people that go to that bar…

A: With the existence of a transaction cost of $90 which has to be split between the two that is $45…

Q: Suppose that in response to huge job losses in the U.S. textile industry, Congress imposes a 100…

A: Due to huge job losses in the U.S. textile industry, congress imposes a 100 percent tariff on…

Q: ities/97507c54-29b3-4b89-bbid-c07ca40b872e/curiosity-feed?section=ef2825d6-34c2-4bae-8d5b-fec67cf632…

A: Tax:Tax is a compulsory payment which is imposed by the government of the country and for the…

Q: Do you currently have a job? Do you feel valued and appreciated at work? Type A Yes Yes 4.7% 7.9%…

A: Unemployed are those people who are willing to work but do not have a paid job. Unemployment rate…

Q: The South Korean Government in the 1970s decided to follow a strategy of increased investment in…

A: Scarcity refers to the limited availability of resources, that are used to produce goods and…

Q: Problem 1- Questions d-g please!!

A: Budget Line: given the price of 2 goods and consumer’s income. The budget line shows different…

Q: How does the Overnight Rate Target inuence interest rates throughout the economy? (A) The…

A: The overnight rate basically refers to the interest rate at which a depository institution (usually…

Q: can you plz complete the last part? Thank

A: The rate of unemployment will be calculated as number of unemployed divided with the labor force;…

Q: 20 18 16 Price 14 12 10 ID: 8. 4 2 20 40 60 80 100 120 140 Quantity

A: Slope of demand curve = dP/dQ Considering points (20, 20); (65, 2): Slope = (2 – 20)/ (65 – 20)…

Q: Consumption/Savings 1400 1200 1000 800 600 400 200 0 -200 200 400 600 800 1000 1200 1400 1600 Income…

A: Let's break down the income and consumption/savings data to understand the financial…

Q: Why is the permit needed for all the agencies?

A: The permits are a different form of license issued by the government to every business in the…

Q: What is the highest price consumers would be willing to pay for this product? Also called the…

A: The maximum price that a consumer is willing to pay for a good or service, or the lowest price that…

Q: Write a profit function and graph it to advise the grower on the most profitable amount of…

A: Profit refers to the difference between the total revenue and total costs which a producer earns for…

Q: A period between date of acquisition and date of disposal by a specific owner. a. Ownership life O…

A: Aquisition date means when the asset is purchased new . And the period between acquisition and…

Q: Renting would be better than buying for an individual who does not want to need to pay for…

A: Renting - Renting is the amount paid for using the property and this use can be for personal…

Q: 8. Quantity Demanded Per Quantity Supplied Per Price Per Unit Year Year $ 5 2,000 10 1,800 300 15…

A: Recall that a shortage occurs when Demand exceeds Supply Thus, for a shortage of 500 units we need…

Q: Determine the revenue per year and revenue over the lifetime of the customer Number of smart devices…

A: Revenue is defined as the income of the company. The revenue generated is done from two sources…

Q: None

A: Willingness to Pay (WTP) is an economic concept that refers to the maximum amount an individual or…

Question

11. Problem 11
Bond A pays $4,000 in 20 years. Bond B pays $4,000 in 10 years. (To keep things simple, assume these are zero-coupon bonds, which means the
$4,000 is the only payment the bondholder receives.)
Suppose the interest rate is 7 percent.
Using the rule of 70, the value of Bond A is approximately
and the value of Bond B is approxdmately
Now suppose the interest rate increases to 14 percent.
Using the rule of 70, the value of Bond A is now approximately
and the value of Bond B is approximately
Comparing each bond's value at 7 percent versus 14 percent, Bond A's value decreases by a
percentage than Bond B's value
The value of a bond
when the interest rate increases, and bonds with a longer time to maturity are v sensitive to changes in the interest
rate.

Expert Solution

This question has been solved!

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

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

formula for rule of 70

VIEW

If Interest rate is 7 % then required number to double the investment

VIEW

If Interest rate is 14% then required number to double the investment

VIEW

Part c

VIEW

Part D

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 5 steps

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, economics and related others by exploring similar questions and additional content below.

Similar questions

A retailer bought several pairs of Jean's for $75,000. He sold all but 30 pairs got 86400 making a profit of $70 on each pair sold. How many pairs of Jean's did the retailer buy?
Name: Name: Name: $/unit 25 1 Fertilizing Fish When farmers fertilize their fields, the nitrogen from the fertilizer can get washed into streams which then feed into larger rivers. This "runoff" can cause damage to ecosystems and reduce the number of fish that can be caught by fishermen farther downstream. 20 Who are the producers of fertilizer? Who are the consumers of fertilizer? Who are the third parties affected by the externality? The graph below shows the market for fertilizer where P=2+0.5Q, and P = 20 - Qd. The marginal external cost of fertilizer = Q. This means, for example, if 3 units of fertilizer are used then the last unit of fertilizer causes fishermen to suffer a $3 loss...however, they are worse off by $1 from the first unit and $2 from the second unit as well for a total welfare loss of $6. What is the equation for your new curve? Label the curves on the graph, indicating if they're S or D, private or social. Draw & label a new curve demonstrating the externality. 15…
do fast don't use chatgpt answer,
- Student Portal MyCC & CC Ema X 2ECON100C Assignment 1: Attem X i mycc.coquitlamcollege.com/mod/quiz/review.php?attempt-203068&cmid 143217 Harveer Kaur Bran MYCC MyCC Library CC Student Portal English (en) 1.00 Peducton 15 P Flag question 14 ronter 12 6 Coll phones (millons per year) Cell phones (milllons) 3 4 DVDS (millons) 15 14 12 9 5 Possibiity D The figure above shows a production possibilities frontier. In the figure, when the economy moves from point E to point D, what is the opportunity cost of a DVD? Select one: ENG US
21
I need help with HW.
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.
Typed plz and asap please provide a quality solution and take care of plagiarism also
There is a bar on Off‐Main Street called the Rock‐n‐Roll Bar. All the people that go to that bar like to listen to rock‐n‐roll music, and they love live bands. If the bar owner brings bands in to play music on a Saturday night, she will make a lot of money. However there are tenants in this building who get annoyed by the loud music. The benefits/costs to the owner/tenants of having zero, one, two or three bands on a Saturday night are listed in the attached table. If the tenants have the right to be free of loud music enforced through a property rule, how many bands will play in Rock‐n‐Roll Bar on a Saturday night? A. Zero B. One C. Two D. Three E. It depends on transaction costs
why choose A?
Pls help ASAP
B9