- Tax Planning
- Investments 1: Before you Invest
- Investments 2: Your Investment Plan
- Investments 3: Securities Market Basics
- Investments 4: Bond Basics
- Investments 5: Stock Basics
- Investments 6: Mutual Fund Basics
- Investments 7: Building Your Portfolio
- Investments 8: Picking Financial Assets
- Investments 9: Portfolio Rebalancing and Reporting
- Retirement 1: Basics
- Retirement 2: Social Security
- Retirement 3: Employer Qualified Plans
- Retirement 4: Individual and Small Business Plans
- Estate Planning Basics
Case Study #4 Answer
Calculations
The bond’s current yield is $100/$1000 = 10%
At 5% Hassan can sell his bond for:
N=10, I=5%, PMT=100, FV=1,000, solve PV?
$1,386.07
At 12% Hassan can sell his bond for:
N=10, I=12%, PMT=100, FV=1,000, solve PV?
$887.00
This implies a negative relationship between bond prices and interest rates. In other words, as interest rates increase bond prices fall, and when interest rates decrease bond prices rise.
