Money would you invest in the zero-coupon bond

Assignment Help Financial Management
Reference no: EM131187905

You intend to construct a portfolio with a duration of 5 year using a 7-year zero coupon bond and a 3-year 9% annual coupon bond with a yield to maturity of 12%. To achieve this goal, how much precenage of money would you invest in the zero-coupon bond?

Reference no: EM131187905

Questions Cloud

Analyze the capital asset pricing model : Analyze the Capital Asset Pricing Model (CAPM). Using the course text and an article from ProQuest as references, address the following: Explain how the CAPM assists in measuring both risk and return. Explain how the CAPM assists in calculating the w..
Prepare the marginal cost of capital schedule : Company ABC has an optimal capital structure of 40% debt and 60% common equity. Assume that the debt break points occur at $36 million and $50 million, and that the common equity break point occurs at $45 million. The after tax cost of debt is 6%, 10..
What must the expected return on the market be : A stock has an expected return of 10.5 percent, its beta is 1, and the risk-free rate is 6.25 percent. What must the expected return on the market be?
Retirement fund so its perspective is long term : Describe how you would invest in the following case: You have been given $300 million to invest and manage. The fund is a pension/retirement fund so its perspective is long term with low risk of loss of capital and a required return of 5% per year. T..
Money would you invest in the zero-coupon bond : You intend to construct a portfolio with a duration of 5 year using a 7-year zero coupon bond and a 3-year 9% annual coupon bond with a yield to maturity of 12%. To achieve this goal, how much precenage of money would you invest in the zero-coupon bo..
Calculate the change in the key balance sheet accounts : Calculate the change in the key balance sheet accounts between 2014 and 2015 and classify each as a source (S), a use (U), or neither (N), and indicate which type of cash flow it is: an operating cash flow (O), and investment cash flow (I) or a finan..
The market has an expected rate of return : The market has an expected rate of return of 12.8 percent. The long-term government bond is expected to yield 4.5 percent and the U.S. Treasury bill is expected to yield 3.4 percent. The inflation rate is 3.1 percent. What is the market risk premium?
What is the weighted average contribution margin per unit : Lambardi Company sells 3 types of bags. Bag A sells for $18 and has variable cost of $9.00 per unit. Bag B sells for $16 and has variable cost of $12.00 per unit. Bag C sells for $8 and has variable costs of $6.00 per unit. Lambardi sells in a mix of..
Publically traded health care organizations : Suppose you are a newly appointed CFO of your chosen health care organization. One of your first tasks is to conduct an internal financial analysis of the organization. Conduct a brief financial analysis and review of the chosen company’s financial s..

Reviews

Write a Review

Financial Management Questions & Answers

  Deplete the fund after the last withdrawal

A small company wishes to set up a fund that can be used for technology purchases over the next 6 years. Their forecast is for $18,000 to be needed at the end of year 1, decreasing by $2,000 each year thereafter. The fund earns 9% per year. How much ..

  Required to fill the operating room staffing positions

Metropolis Health System (MHS) uses a basic work week of 40 hours throughout the sys- tem. Thus, one full-time employee works 40 hours per week. MHS also uses a standard 24-hour scheduling system of three 8-hour shifts. Set up a staffing requirements..

  Yield to maturity on the firms bonds

Fifteen years ago TravelEasy Inc. issued twenty-five-year 10% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have fallen and the yield to maturity on the firm's bonds is now 6%. Given this information, what i..

  Primary goal of corporate financial management

The primary goal of corporate financial management is to maximize the:

  Explain in detail what beta coefficient

In looking for investment information concerning the bakers company common stock, you have read in one source that its beta coefficient for the last 3 years is 1.1 while in another source the beta coefficient is 1.4 for the last 5 years. Explain in d..

  Treasury inflation protected security time inflation

Refer to the table below and calculate both the real and nominal rates of return on the TIPS bond in the second and third years. Principal and Interest Payments for a Treasury Inflation Protected Security Time Inflation in Year Just Ended Par Value C..

  Interest rates in the form of add-on interest

Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a 1-year loan is quoted with a 19.0% interest rate and you borrow $1,000, then you pay back $1,080. But you make these payments in monthly installments of $90 eac..

  Increase the current value of a stock

Which one of the following will increase the current value of a stock?

  Prepare a schedule of note discount amortization

On December 31, 2010, Green Company finished consultation services and accepted in exchange a promissory note with a face value of $400,000, a due date of December 31, 2012, and a stated rate of 5%, with interest receivable at the end of each year. D..

  Problem leverage-long-term debt-equity ratio

A firm has a long-term debt-equity ratio of .4. Shareholders’ equity is $1 million. Current assets are $200,000, and the current ratio is 2. The only current liabilities are notes payable. What is the total debt ratio?

  Describe the strategic importance to updating survey data

Describe the strategic importance to updating survey data. Explain the different methods for updating data. Provide an example to illustrate updating data.

  What is the price of the bond now-what yield to maturity

Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 8.8%. Now, with 7 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has in..

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!

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