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!
Suppose that you are managing a pension fund with obligations to make perpetual payments of $4.2 million per year to beneficiaries. The required rate of return is 20%.
a. If the duration of 5-year maturity bonds with coupon rates of 16% (paid annually) is 3.7 years and the duration of 20-year maturity bonds with coupon rates of 10% (paid annually) is 6.2 years, how much of each of these coupon bonds (in $ market value) will you want to hold to fully fund and immunize your obligation? The yield to maturity on both bonds is 20%.
[Hint: compute the present value and duration of liabilities first. This provides the dollar amount and target duration you will need to match with an investment in the two coupon bonds above.]
(Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal place.)
Holdings:
5 Year Bond $ _________ Million
20 Year Bond $ _________ Million
b. What will be the par value of your holdings in the 20-year coupon bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Par Value $ _______ Million
What is the maximum amount the family should spend each month on a mortgage payment?
The management of Erion Corporation is considering the purchase of an automated molding machine that would cost $280,534, would have a useful life of 5 years, and would have no terminal (salvage) value. The automated molding machine would result in c..
Hill Propane Distributors sells propane gas throughout the eastern half of Texas. Because of population growth and a construction boom in recent years, the company has prospered and expects to continue to do well in the near term. Investors expect an..
Treasury bills are issued by the U.S government. In which type of financial market do outstanding, or already issued treasury bills trade?
Research reported in the chapter shows that the correlation between the U.S. and Japanese stock markets is 0.35. Assume that the standard deviations of the two markets are 15 percent and 18 percent, respectively. What is the variance of the revised p..
The proceeds from the bonds are $19,604,145. The company uses effective-interest amortization.
What was the arithmetic average return on Crash-n-Burn’s stock over this five-year period?
What are the draw backs and benefits in such an arrangement?
what would be your gain if you use $1,000,000 and execute locational arbitrage?
Allied Chemical Company has five profit centers with the following 2013 revenue and cost of goods sold (COGS).
how much of the loss will be covered by each policy if the loss is settled on a pro rata basis by the insurers?
A two yr. treasury bond has annual coupon pmts. Describe how an arbitrage situation could be developed.
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