Pension fund has an average duration of its liabilities

Assignment Help Financial Management
Reference no: EM131500352

A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan?

a) 52

b) 48

c) 33

d) 25

Reference no: EM131500352

Questions Cloud

What consumption tax rate would yield the same tax revenue : Rich lives two periods. His earnings in the present are 100; in the future they are 75.6. The interest rate is 8 percent.
What benefits are provided by constant service time model : What benefits are provided by constant service time model? Discuss advantages and disadvantages of queuing theory for an organization in the service industry.
Portfolio of the stock and the risk-free asset : portfolio of the stock and the risk-free asset.
Aviation maintenance safety : Explain what safety programs you would enhance, develop, or establish to mitigate those weaknesses?
Pension fund has an average duration of its liabilities : A pension fund has an average duration of its liabilities equal to 15 years.
How much did the prices differ : How much did the prices differ? What made the greater difference: incentives or initial prices? Why do you think that is the case?
20ml of 10 n hcl are diluted with distilled water to form : 20 ml of 10 N HCl are diluted with distilled water to form one litre of the solution. What is the normality of the diluted solution?
Social movement or anything related to public sociology : You need a short essay about 250 words on any social movement or anything related to public sociology.
Perpetual and the periodic inventory systems : In 250 words describe the perpetual and the periodic inventory systems.

Reviews

Write a Review

Financial Management Questions & Answers

  What additional information might you seek

You are the controller of ABC manufacturing corp, a publicly traded furniture manufacturing company, based on Long Island. Business has been going well for ABC. Over the last four quarters the EPS have been 50, 54,59, and 60 cents per share. What cou..

  Article online about absorption and variable costing

Find a journal article online about absorption and/or variable costing.

  What is the price per share of the company stock

The company’s WACC is 8.7 percent and the tax rate is 35 percent. What is the price per share of the company's stock?

  Non-dividend-paying stock has a futures contract with price

A non-dividend-paying stock has a futures contract with a price of $71.5 and a maturity of six months. If the risk-free rate is 4.1 percent, what is the price of the stock?

  What is the cost preferred stock financing

The preferred stock of gator industries sells for $35.66 and pays $2.74 per year in dividends. What is the cost preferred stock financing? How should this cost be incorporated into the NPV of the project being financed?

  What is the year two cash flows

Trinadad Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life and the allowed depreciation rates, (MACRES) for such a property are 33%, 15%, and 7% for years 1-4. Revenues and other ..

  What is the standard deviation of these returns

Over the past six years, a stock had annual returns of 14 percent, -3 percent, 8 percent, 21 percent, -16 percent, and 4 percent, respectively. What is the standard deviation of these returns? 15.08 percent 11.27 percent 14.40 percent 13.59 percent 1..

  What is the efficient number of lighthouses

Suppose that there are only two fishermen, Zach and Jacob, who fish along a certain coast. They would each benefit if lighthouses were built along the coast where they fish. The marginal cost of building each additional lighthouse is $100. Explain wh..

  Calculate the present value of each of the two investments

Calculate the present value of each of the two investments assuming a 10 percent discount rate-state which one will provide higher return over three-year period

  What is the cash flow associated with the sale of used truck

If the Johnson Company of Problem 1 is subject to a marginal tax rate of 34%, what is the cash flow associated with the sale of the used truck?

  Common stocks while marvin invested in corporate bonds

Your nephews Ricky and Marvin FiftyCent differ in investment philosophies—Marvin is conservative and Ricky holds a moderate investing outlook. Their father left each of them $100,000 when he died ten years ago, and Ricky invested in common stocks whi..

  Family members with limited risk of paying penalty taxes

John has established a $10,000,000 private foundation. He has a large family including a spouse, three brothers, four adult children, and eight grandchildren (two of whom are adults). The board of the foundation currently consists of him and two of h..

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