Finding the changing interest rates over time

Assignment Help Accounting Basics

Reference no: EM13987941

Assume that you are attempting to fund a $50,000,000 liability associated with the clean-up of an environmental site that will be due in seven years. If you don't meet the liability you will be out of business. You have an amount of money to invest today that you feel will be sufficient. How might you manage a bond portfolio to ensure that it will be enough at the time you need it? Give two alternatives. Be sure you explain how the alternatives work so that even a government regulator could understand it. As part of your answer be sure to discuss the two risks that bond holders are exposed to because of changing interest rates over time.

Reference no: EM13987941

Questions Cloud

Calculate usher sports shops cash flow from operations : In 2015, Usher Sports Shop had cash flows from investing activities of –$4,534,000 and cash flows from financing activities of –$5,965,000. The balance in the firm’s cash account was $1,632,000 at the beginning of 2015 and $1,776,000 at the end of th..

Calculate the securitys default risk premium : A particular security’s equilibrium rate of return is 9 percent. For all securities, the inflation risk premium is 3.80 percent and the real risk-free rate is 2.8 percent. The security’s liquidity risk premium is 0.35 percent and maturity risk premiu..

Designing an application utilizing event-driven programming : Designing an application utilizing event-driven programming - the Model-View-Controller design pattern - You can review the code of the program "Puzzler" seen in lab 4 to help you with the class DotButton.

What is the value of the lump sum : What is the lump sum deposited today at 8% compounded qrtly for 10 years, will yeild the same amount if $4000 deposit with 6% interest end of 6 months compound simi annual, 10 years. What is the value of the lump sum?

Finding the changing interest rates over time : Give two alternatives. Be sure you explain how the alternatives work so that even a government regulator could understand it. As part of your answer be sure to discuss the two risks that bond holders are exposed to because of changing interest rat..

What is the one-year treasury security rate : Suppose we observe the three-year Treasury security rate (1R3) to be 5.3 percent, the expected one-year rate next year—E(2r1)—to be 5.8 percent, and the expected one-year rate the following year—E(3r1)—to be 6.2 percent. If the unbiased expectations ..

Total of ten consecutive cash flows : Suppose you deposit $529 five years from today and each year thereafter deposit $529 for a total of ten consecutive cash flows (CF's); i.e. ten consecutive annual CF's beginning five years (t = 5) from today. Calculate the present value today (t = 0)..

Effect of preferred stock dividends : What guidance does the SEC provide for public companies with respect to the reporting of the "effect of preferred stock dividends and accretion of carrying amount of preferred stock on earning per share?

Estimate the sream flow rate and compositions : For a production rate of 1250kg/h M.E.K- draw a flowsheet for the process and estimate the sream flow rate and compositions.

User Account

All Pages