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NARA [144]
3 years ago
9

An investor holds two bonds, one with 5 years until maturity and the other with 20 years until maturity. Which of the following

is more likely if interest rates suddenly increase by 2%? 1)The 5-year bond will decrease more in price. 2)The 20-year bond will decrease more in price. 3)Both bonds will decrease in price similarly. 4)Neither bond will decrease in price, but yields will increase. please explain
Business
1 answer:
cricket20 [7]3 years ago
4 0

Answer:

2) The 20 year bond will decrease more in price

Explanation:

Bonds represent debt securities whereby the issuer raises long term finance, with an obligation to pay a fixed rate of coupon payments to the lender and principal repayment upon maturity.

Bond prices refer to the present value of a bond's stream of coupon payments and principal repayment at the end.

The market rate of interest represents an investors required rate of return also known as yield to maturity (YTM).

Bond prices and interest rates have inverse relationship. When market interest rates increase, the price of bonds fall.

In the given case, the fall in the value would be more in case of 20 year old bond since the interest rate pattern is more certain in shorter duration than for longer duration.

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PLEASE HELP!!! What is the name for the highest amount a policyholder pays for deductibles, coinsurance, and co payments?
Maurinko [17]
C. Out-of-pocket maximum
4 0
3 years ago
Potter Industries has a bond issue outstanding with an annual coupon of 6% and a 10-year maturity. The par value of the bond is
kirill115 [55]

The value of the bond is $865.80.

<h3>What is a bond?</h3>

A bond is a debt instrument used to raise capital. Bondholders receive periodic interest payment. At the maturity of the bond, the bondholders receive the amount invested.

<h3>What is the value of the bond?</h3>

The value of the bond can be determined by calculating the present value of the bond. The present value is the sum of the discounted cash flows.

Present value = (60 / 1.08) +  (60 / 1.08^2) +  (60 / 1.08^3) +  (60 / 1.08^4) +  (60 / 1.08^5) +  (60 / 1.08^6) +  (60 / 1.08^7) +  (60 / 1.08^8) +  (60 / 1.08^9) +  (60 / 1.08^10) +  (1000 / 1.08^10) = $865.80

To learn more about present value, please check: brainly.com/question/25748668

5 0
2 years ago
The government has set a price floor on bread. Manufacturers can’t sell loaves for less than $5.00, which is a dollar above the
Aleonysh [2.5K]

Answer:

A. The quantity demanded for bread will decrease , quantity supplied will increase

Explanation:

PRICE FLOOR is the minimum mandated price set by government , usually above equilibrium price , to ensure producers' protection (if market price is perceived to be low) . EG : Minimum Support Price for agricultural products to protect farmers .

However at this raised price : There is Excess Supply , as Quantity Supplied increases with price increase (law of supply - price & supply direct relationship) , Quantity Demanded falls (law of demand - price & demand inverse relationship)  

6 0
2 years ago
Rizzo Goal Inc. produces and sells hockey equipment, often custom made for online orders. The company has the following performa
forsale [732]

Answer and Explanation:

The computation is shown below:

a. The new customer retention rate is

(a) the day above 3 days from order to delivery

= 3.5 - 3

= 0.5 days

And,

The reduction in customer retention rate is

= 0.5 ×  1%

= 0.5%

errors above three per month is

= 6 - 3  

= 3

The reduction in customer retention rate is

= 3 ×  1.5%

= 4.5%

So, the new customer retention rate is

= 60% - 0.5% - 4.5%

= 55%

(b) The total reduction in customer retention rate is

= 0.5 + 4.5

= 5.0%

The reduction in market share is

= 5% × 0.5

= 2.5%

Now

New market share is

= 21.4% - 2.5%

= 18.9%

8 0
3 years ago
Volkswagen achieved spectacular success in the late 1990s by targeting the nostalgia segment, 35- to 54-year-old baby boomers, w
serg [7]

Answer: Differentiation focus

Explanation:

Marketing focus is not an actual marketing term. Cost leadership strategy's main focus is on the reduction of expenses which in turn, lowers prices of product while targeting a wide array of market segments.

In this question, Volkswagen is not reducing costs, or targeting large market segments. Differentiation strategy” require products to possess significant points of difference in brand image, product offerings, higher quality, advanced technology, and superior service to command a higher price while also targeting a wide array of market segments. For this question, these factors are not explaineded as targeting a broad market segments.

Differentiation focus strategy requires the products to have significant points of difference that is vital to target one or only a few market segments. For this question, Volkswagen uses a specific and unique factor to appeal to a specific group of people. So differentiation focus is the answer.

7 0
3 years ago
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