Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
ABC Corp. expects to make payment of one time lump sum cash flow of $10 million in 10 years. The firm would like to immunize its liability by investing in two different securities: an annuity paying $1 million for the next 5 years annually and a perpetuity paying $50,000 annually forever. Each of the securities has a 5% yield.
- Find the Macaulay's duration for (i) the lump sum liability, (ii) the 5-year annuity and, (iii) the perpetuity. Show calculations.
- Calculate the convexity for each of the three securities. Show calculations.
- If yields change from 5% to 8%, what will be the best estimate for the percentage change in price of the 5-year annuity? Compare this to the actual percentage change in the price of the 5-year annuity. Are the two percentage changes in prices identical?
- How much of each of the two securities (in market value) will ABC Corp. want to hold to fully immunize its obligation?
- Now suppose that interest rates immediately rises from 5% to 8%. What happens to the net position, that is, to the difference between the value of asset and liability?
Calculate the duration and the modified duration of Treasury bond A. Give your answer in terms of years, rounded to three decimal places.
kritzberg company sells a product at 60 per unit that has unit variable costs of 40. the companys break-even sales
The income statement and the operating section of the cash flow statement present a company's results in very different formats. In your opinion, which statement is more important to shareholders? To company management? To creditors? Explain your res..
What is the present value of a perpetual stream of cash flows that pays ?$1000 at the end of year one and the annual cash flows grow at a rate
How are the rates on short-term borrowing typically set? What role does either the prime rate or LIBOR play in this process? What is the effective borrowing rate (EBR)? How does the EBR differ from the stated all-in-rate
What are their nominal yield to maturity and their nominal yield to call? What return should investors expect to earn on these bonds?
Your credit card company charges you 1.13 percent per month. What is the annual percentage rate on your account?
archer daniels midland company is considering buying a new farm that it plans to operate for 10 years. the farm will
please show work if possible green thumb garden centers sells 240000 bags of lawn fertilizer annually. the optimal
A firm believes it can generate an additional $4,800,000 per year in revenues for the next 5 years if it replaces existing equipment that is no longer usable.
To test this, a consumer group found the cost of maintaining 10 cars for a year, and the mean saving was €79 with a standard deviation of €20. What does this say about the manufacturer's claim?
Regarding the norms: upholding fundamental freedoms, respect for property, valuing privacy, protection from crime, right of self-defense
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!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd