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Question: Immunization
Your company has just built and patented a laser defense system and is planning on installing the equipment in various locations around the country. To finance the installations, you, the CFO, have borrowed $1 billion, which your company will need to repay in five years. The market interest rate is 8%, so the present value of this obligation is $680,583,197. You decide to fund the obligation using three-year zero-coupon bonds and perpetuities that make annual coupon payments.
1. How can you immunize the obligation? (Here, you need to construct an immunized portfolio that consists of the zero-coupon bonds and the perpetuities.)
2. Now suppose that one year has passed and that the market rate is still 8%. You need to ensure that the obligation is still fully-funded and immunized. Is the obligation still fully-funded and immunized? If not, what do you need to do to fully fund and immunized the obligation?
The current exchange rate is $1/16.52 Chinese Yuan. Currently the 1 year US treasury is paying 3% and the Chinese bond market is paying 79%.
The returns for IMB over the last 3 years are given below.
if a typical firm reports 20 million of retained earnings on its balance sheet could its directors declare a 20
(IRR with uneven cash flows) TBC Bank is considering purchasing a new building for newly opened branch in region. Required rate of return for the project is 10.
What must be known, estimated, and assumed to answer the research question? What would your recommendations be with respect to fair-value accounting standards for banks? Outline the basis of your recommendation.
Martin's Inc. has paid an annual dividend of $2.50 a share. The dividends are expected to grow at 10% for the next five years.
Icy Treats, Inc., is a seasonal business that sells frozen desserts. At the peak of its summer selling season the firm has $35,000 in cash, $125,000 in inventory, $70,000 in accounts receivable, and $65,000 in accounts payable. During the slow winter..
Suppose the expected rate of inflation declines by 2.0% per year. Write the new equation for the Security Market Line.
1. How are megaprojects managed? What is meant by contract administration? 2. Discuss some of the complexities of global outsourcing? Give specific examples.
Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?
1. How does the process of factoring work? 2. What would be the impact on the company you wrote your research paper on if they began to use some form of factoring for all or some receivables? or how does factoring they already use help them?
Problem: Assume that a EURO Call option trades at $0.05. The strike price of the option is $0.9200 and the current spot rate is $0.9203. A Euro forward contract that expires at the same time with the option is at $0.9195. Use this information to d..
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