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Pension funds pay lifetime annuities to recipients. If a firm remains in business indefinitely, the pension obligation will resemble a perpetuity. Suppose that you are managing a pension fund with obligations to make perpetual payments of $4 million per year to beneficiaries. The yield to maturity on all bonds is 10%.
Problem a) Assume that the duration of 5-year maturity bonds with coupon rates of 12% (paid annually) is 4 years, and the duration of 20-year maturity bonds with coupon rates of 6% (paid annually) is 14 years. Calculate how much of each of these two coupon bonds (in market value) you will want to hold in order to both fully fund and immunize your obligation.
Problem b) Calculate the total par value of your holdings in the 20-year coupon bond.
Show the effects of the previous transactions on the accounting equation using the following format.-Prepare an income statement for the month of June.
how much did the firm's market value and book value per share differ - Calculation of difference between firm's market value and book value per share.
Molson Brewing Co. issued a $60,000, 60-day, discounted note to National Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will
From the e-Activity, determine a significant factor that contributed to one joint venture's success and the other joint venture's failure. Suggest the most critical element that should be included in a joint venture agreement to ensure success.
Marsden manufactures a cat food product called Special Export. Marsden currently has 5,000 bags of Special Export on hand. The variable production costs per bag are $1.9 and total fixed costs are $5,000. The cat food can be sold as it is for $9.1 per..
This exercise uses the "Business Plan Financials" MS Excel template. Develop the Sources and use of funds, Plan assumptions and Break-even analysis.
Explain how and why some changes in accounting principle are reported prospectively. Explain how and why changes in estimates are reported prospectively. Describe the situations that constitute a change in reporting entity.
Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. Compute the materials pr..
Calculate diluted EPS for the year ending 31st Dec 2015. During the year ending 2015 the company proposed dividend of TZS 216,000 for Convertible Preference
You are planning to make monthly deposits of $460 into a retirement account that pays 10 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 30 years.
Determine the gross pro?t on sales recorded by both companies. Determine the gross pro?t to be shown on the consolidated income statement.
What is the related journal entries for the Whilshire Branch of Watt Corporation: the branch uses the perpetual inventory system.
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