Both Bond Sam and Bond Dave have 7 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has six years to maturity, whereas Bond Dave has 19 years to maturity. a. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Bond Sam and Bond Dave?

assume Par Value = 1000

Price = 1000

Coupon = 7%

Coupon = Coupon rate * Par Value/2 = 7% * 1000/2 = 35

For Sam Maturity = 6 years

Price = summation Coupont/(1+YTM/2)2t + Par Value/(1+YTM/2)2t

1000 = 35/(1+YTM/2)2t + 1000/(1+YTM/2)2t

YTM = 7%

For Dave Maturity = 19 years

Price = Coupont/(1+YTM/2)2t + Par Value/(1+YTM/2)2t

1000 = 35/(1+YTM/2)2t + 1000/(1+YTM/2)2t

YTM = 7%

If YTM increases by 2% so new YTM =9%

For Sam Maturity = 6 years

Price = Coupont/(1+YTM/2)2t + Par Value/(1+YTM/2)2t

Price = 35/(1+(9%/2)2t + 1000/(1+9%/2)2t

Price = 908.81

Percentage change in price of Sam bond = 908.81 -1000/1000 = -9.12%

For Dave Maturity = 19 years

Price = Coupont/(1+YTM/2)2t + Par Value/(1+YTM/2)2t

Price = 35/(1+9%/2)2t + 1000/(1+9%/2)2t

Price = 819.50

Percentage change in price of Dave bond = (819.50-1000)/1000 = -18.05%

If YTM decreases by 2% so new YTM =5%

For Sam Maturity = 6 years

Price = Coupont/(1+YTM/2)2t + Par Value/(1+YTM/2)2t

Price = 35/(1+(5%/2)2t + 1000/(1+5%/2)2t

Price = 1102.58

Percentage change in price of Sam bond = (1102.58 -1000)/1000 = 10.26%

For Dave Maturity = 19 years

Price = Coupont/(1+YTM/2)2t + Par Value/(1+YTM/2)2t

Price = 35/(1+5%/2)2t + 1000/(1+5%/2)2t

Price = 1243.49

Percentage change in price of Dave bond = (1243.49-1000)/1000 = 24.35%

explanation:

a gas is not used in hydraulic machines as the fluid because gas is easily compressible and so if a gas is used, the energy would mostly go into compressing a gas. therefore a liquid is used in hydraulic machines as the fluid.

sound is invisible, but sometimes we can feel it. when a kettle-drum is thumped with a stick that time the tight drum skin moving up and down very quickly for some time and then it pumped sound waves into the air. loudspeakers also work in a similar manner.

components of a speaker:

electromagnet

in order to translate an electrical signal into an audible sound, an electromagnet is used in looudspeakers

  suspension

suspension is used to   center the voice coil in the gap of the magnet and it exerts a restoring force to keep it there. suspension is used to limits the maximum mechanical excursion of the diaphragm and voice coil.

voice coil

voice coil is a coil of wire which is attached to the apex of a loudspeaker cone. it provides the motive force to the cone by the reaction of a magnetic field to the current passing through it.

cone

in a   loudspeaker, a   thin, semi-rigid membrane attached to the voice coil, which moves in a magnetic gap due to which it vibrates   and produced sound. it is known as diaphragm and it can also be called a cone, though not all speaker diaphragms are cone-shaped.

surround

surround is also known as front suspension. surround is used to join the cone to the chassis. together with the suspension it controls the cone excursion, and it is also used to   determine how energy which is   travelling through the cone is absorbed, and how the speaker limits when it reaches the ends of its travel.

dustcap

dustcap is used to protect the voice coil from dust and dirt. it is a part of the cone.

how speaker work

the outer part of the cone is fastened to the outer part of the loudspeaker's circular metal rim. the inner part is fixed to   voice coil that sits just in front of a permanent magnet . when loudspeaker is hooked up to a stereo, electrical signals feed through the speaker cables into the coil. it will convert the coil into an electromagnet magnet . when electricity flows back and forth in the cables, the electromagnet either repels or attract the permanent magnet. this moves the coil back and forth, and it pull and push the loudspeaker cone. like a drum skin vibrating back and forth, the moving cone pumps sounds out into the air.in this way loudspeakers works.