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A pension plan is obligated to make disbursements of $2.7 million, $3.7 million, and $2.7 million at the end of each of the next three years, respectively. Find the duration of the plan's obligations if the interest rate is 10% annually. (Do not round intermediate calculations. Round your answer to 4 decimal places.)
Duration years
The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. If you pay an option premium of $5,000 to buy this call, a..
The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has a cost of $155,000. The project will produce 950 cases of mineral water per year indefinitely. Assume that cash flows consist only of after-tax..
Briefly explain what a credit default swap is and its role in the 2008 AIG bailout. Briefly explain the following Greeks: Delta, Theta, Gamma, Vega, Rho.
Scholes Industries has a target capital structure consisting of 45% debt, 10% preferred stock, and 45% common equity. The before tax YTM on Scholes's long term bonds is 9.5%, its cost of preferred stock is 8%, and its cost of equity is 12.5% if the f..
Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 11 years ago for $8 million in anticipation of using it as a warehouse and distribution site, What is the pro..
Robber Corp. pays a constant $9 dividend on its stock. The company will maintain this dividend for the next 13 years and will then cease paying dividends forever. If the required return on this stock is 9.5 percent, what is the current share price?
How is the Sharpe measure different from the Treynor measures of portfolio performance evaluation? What is the problem with using the Sharpe measure for evaluation of an active portfolio management strategy?
An investment will pay you $81,000 in four years. Assume the appropriate discount rate is 6.25 percent compounded daily. Required: What is the present value?
A project requires an initial investment of $21,600 and will produce cash inflows of $4,900, $14,200, and $8,700 over the next three years, respectively. What is the project's NPV at a required return of 14 percent?
You receive $2,800 at the end of each year for 25 years starting at the end of year 1 and ending at the end of year 25 EXCEPT for years 11, 12 and 13. For years 11, 12 and 13, you will make payments (not receive payments) of $1,000 at the end of thos..
Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 30 percent for the next three years, with the growth rate falling off to a constant 7.5 percent thereafter. If the required return is 13 percent and the company just paid a $2..
What is the present value of the Coca-Cola futures contract? If the contract settles at 105-8, are current market interest rates higher or lower than the standardized rate on a futures contract? Explain. What is the implied annual interest rate on th..
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