Bond portfolios would immunize you from interest rate risk

Assignment Help Financial Management
Reference no: EM131043949

You want to invest in a bond portfolio that you will use later to payoff a liability due in 7 years. Which of the following bond portfolios would immunize you from interest rate risk.

A) Zero coupon bonds with 7 years to maturity

B) A portfolio of bonds with a duration of 7 years

C) A portfolio of bonds with an average 7 years to maturity

D) A and B

E) A and C

Reference no: EM131043949

Questions Cloud

What is the total aftertax cash flow to shareholders : National Business Machine Co. (NBM) has $3 million of extra cash after taxes have been paid. NBM has two choices to make use of this cash. One alternative is to invest the cash in financial assets. The resulting investment income will be paid out as ..
Maximizing rule for a competitive market firm : The profit maximizing rule for a competitive market firm is to produce until MR = MC. What would happen/should the firm do if the competitive firm produced where marginal cost was lower than marginal revenue?
What are the ceos and shareholders : What are the CEOs and shareholders? What alternatives and solutions would you suggest to solve this ethical dilemma?
Reserve requirement applicable to all deposits : Compute the maximum change in total deposits that would result if deposits at financial institutions were immediately decreased by 120 billion and the reserve requirement applicable to all deposits was a) 5% b) 10% c) 50% d) 100%
Bond portfolios would immunize you from interest rate risk : You want to invest in a bond portfolio that you will use later to payoff a liability due in 7 years. Which of the following bond portfolios would immunize you from interest rate risk.
What is the pretax required return on stock : The Gecko Company and the Gordon Company are two firms whose business risk is the same but that have different dividend policies. Gecko pays no dividend, whereas Gordon has an expected dividend yield of 4 percent. Suppose the capital gains tax rate i..
Moralization of technologies - military drones : ‘Moralization' of Technologies - Military Drones: A Case Study (http://www.eir.info/2012/05/02/moralization-of-technologies-military-drones-a-case-study/). You are required to identify the ethical dilemma and undertake an ethical analysis/discussi..
Job satisfaction research report project requirements : The purpose of the 3.2.1 Project is to give you the chance to network with professionals working in your field and to find out about what factors contribute to truly feeling happy at work. This is really a "job satisfaction essay" that asks you to..
Assume the pretax cost of debt is less than cost of equity : Assume the pretax cost of debt is less than the cost of equity.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the dividend yield and the capital gains yield

Normal tea companies grow at a constant rate of 5%. However, Taya's Tea Company has tested a brand new tea that will lead to significant growth. The current dividend is $3.0, but over the next two years it will grow by 25%. What is the dividend yield..

  What is the projected dividend for the coming year

Frey Corp. is experiencing rapid growth. Dividends are expected to grow at 25 percent per year during the next three years, 15 percent over the following year, and then 7 percent per year indefinitely. The required return on this stock is 12 percent,..

  Calculate cost of each capital component for past three year

Calculate the cost of each capital component for the past three years on Walmart. After-tax cost of debt, cost of preferred, and cost of equity with the DCF method and CAPM method. What do you estimate the company's WAAC?

  Journal-corporate governance at diamond foods

You discussed corporate governance in the Discussion. Now you will apply what you learned to analyze the corporate culture and its influence on potential fraud. Read about corporate governance at Diamond Foods, in the Harvard Business Case study link..

  At what interest rate would the company

At what interest rate would the company be indifferent between the two projects?

  What is the probability that a randomly selected mango

What is the probability that the 100 randomly selected apples have a mean weight less than 12.5 ounces? How many of apples have weights between 13 ounces and 15 ounces?

  Savings account earning interest at a rate

If Jackson deposits $60 at the end of each month in a savings account earning interest at a rate of 3%/year compounded monthly, how much will he have on deposit in his savings account at the end of 5 years, assuming he makes no withdrawals during tha..

  Two types of bonds-what is the value of the warrants

Gregg Company recently issued two types of bonds. The first issue consisted of 20-year straight (no warrants attached) bonds with an 10% annual coupon. The second issue consisted of 20-year bonds with a 7% annual coupon with warrants attached. Both b..

  Efficiency ratio and leverage ratio

Efficiency ratio: Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days’ sales in inventory. Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?

  Company have to wait before expanding its operations

Meadow Brook Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $28 million. Management has decided to save $1.4 million a quarter for this purpose. The firm earns 6 percent compounded q..

  Using the non-constant growth model

Using the Non-Constant Growth Model, calculate the (intrinsic) value of a stock paying the following dividend and with the given values for the 'required rate of return' ( or 'r') and assumed constant growth rate (or 'g'). The non-constant growth per..

  Present and future values of single cash flows

Find the following values, using the equations, and then work the problems using a financial calculator to check your answers. Disregard rounding differences. Then, without clearing the TVM register, you can "override" the variable that changes by si..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd