User Account

All Pages

How can the manager immunize the obligation

Assignment Help Finance Basics
Reference no: EM131993620

Consider the following problem:

An insurance company must make a payment of £19,487 in 7 years. The market interest rate is 10%, so the present value of the obligation is £10,000. The company's portfolio manager wishes to fund the obligation using 3-year zero-coupon bonds and perpetuities paying annual coupons.

How can the manager immunize the obligation?

Suppose that 1 year has passed, the interest rate remains at 10%. The portfolio manager needs to re- examine her position. Is the position still fully funded?

Reference no: EM131993620

Questions Cloud

Sinking fund is managed by trustee : A sinking fund is managed by a trustee for which one of the following purposes?
What rate would you actually be paying here : The interest rate quotation in this example requires the borrower to pay two points to the lender up front and repay the loan later with 7.7 percent interest.
Define the differences between primary : Define the differences between primary, secondary and tertiary sources in a secondary search?
What were the main events and ideas leading to the civil war : Take into consideration elements of the U.S. Constitution, Westward expansion, statehood and the various compromises, states' rights, the industrialization.
How can the manager immunize the obligation : Suppose that 1 year has passed, the interest rate remains at 10%. The portfolio manager needs to re- examine her position. Is the position still fully funded?
Exchange rate policy at the monetary authority of singapore : Questions: How do changes in real exchange rate manifest under fixed and floating rate regimes
Basis of accounting and the cash basis of accounting : Explain the difference between the accrual basis of accounting and the cash basis of accounting. What are the major reasons for using accrual accounting?
Design business network for a primary school : Melbourne institute of technology MN503 - Overview of Internetworking - Primary School Network Design with Guest Network
What historical period is the author writing about : Write a summary of the book. Did the author of this work change your perspective or understanding?

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the value of the index

The annual expected dividend on the S&P index was about 154.6. If the dividend is expected to grow at a steady rate of 8% a year and the required annual rate of return is 10%, what is the value of the index? a. 1193 b 1700 c 7730 d none of these

  Estimate the p-e ratio for national city corporation

National City Corporation, a bank holding company, reported earnings per share of $2.40 in 1993, and paid dividends per share of $1.06.

  Blackstone inc has a five-year bond outstanding that pays

blackstone inc. has a five-year bond outstanding that pays 60 annually. the face value of each bond is 1000 and the

  Calculate the npv of each choice

The opportunity cost of capital is 11.8 percent. Calculate the NPV of each choice and suggest when should Predator sell the company?

  What is the manager payoff

Suppose an executive has been granted 1,000 stock options (the right to buy at the strike price) with a strike price equal to the current stock price of $3.00.

  Review the total revenue

General Motors may file for bankruptcy during this class. Find the GM 2008 Annual report and review the total revenue, net income and profits for 2008 compared to previous year.

  Costs of care for treating at least three diseases

Requirements Writer describes trends in the costs of care for treating at least three diseases or conditions.

  Risk and return

From the e-Activity, determine whether stock prices are affected more by long-term or short-term performance. Provide one (1) example of the effect that supports your claim.

  What is net income-what is roa

If the profit margin is 7 percent, what is net income? What is ROA? What is ROE?

  You are inspecting a present value table as the interest

you are inspecting a present value table. as the interest rate increases you should expect the table value toa.

  Nominal rate of return with phases of robert life

Robert Ford Simpson is a simple man who, at the age of 25, is aware that life requires much planning and wisdom. He currently lives in Australia.

  Analyze the types of risks that must be managed

Compare options, forwards, futures, and swaps for managing foreign exchange risk exposure. Form an argument for what you believe is the best method for a non-financial firm in managing this exchange rate risk.

Free Assignment Quote

Assured A++ Grade

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd