User Account

All Pages

What is the duration of? acorn equity

Assignment Help Financial Accounting
Reference no: EM132969049

Question - You have been hired as a risk manager for Acorn Savings and Loan.? Currently, Acorn's balance sheet is as follows? (in millions of? dollars):

Assets Liabilities

Cash reserves 50.0

Checking and savings 80.0

Auto loans 100.0

Certificates of deposit 100.0

Mortgages 150.0

?Long-term financing 100.0

Total Assets 300.0

Total liabilities 280.0

?Owner's equity 20.0

Total liabilities and equity 300.0

When you analyze the duration of? loans, you find that the duration of the auto loans is 2.0 ?years, while the mortgages have a duration of 7.0 years. Both the cash reserves and the checking and savings accounts have a zero duration. The CDs have a duration of 2.0 ?years, and the? long-term financing has a 10.0?-year duration.

Required -

a. What is the duration of? Acorn's equity?

b. Suppose Acorn experiences a rash of mortgage? prepayments, reducing the size of the mortgage portfolio from $150.0 million to $100.0 ?million, and increasing cash reserves to $100.0 million. What is the duration of? Acorn's equity? now? If interest rates are currently 4% and were to fall to 3%?, estimate the approximate change in the value of? Acorn's equity.? (Assume interest rates are APRs based on monthly? compounding.)

c. Suppose that after the prepayments in part ?(b?), but before a change in interest? rates, Acorn considers managing its risk by selling mortgages? and/or buying 10?-year Treasury STRIPS? (zero coupon? bonds). How many should the firm buy or sell to eliminate its current interest rate? risk?

Reference no: EM132969049

Questions Cloud

Compute the total amount to be reported by skysong : On the basis of this information, compute the total amount to be reported by Skysong for intangible assets on its balance sheet at year-end
Completing a group project : What challenges have you encountered with completing a group project.
At what amount will accounts receivable be shown : Sales are collected as follows: 10% in the month of sale; 60% in the month following the sale; At what amount will accounts receivable be shown
What is the present value : Question - What is the present value of RM400 to be received at the end of every year for 10 years, if the discount rate is 5% compounded annually
What is the duration of? acorn equity : When you analyze the duration of? loans, you find that the duration of the auto loans is 2.0 ?years, What is the duration of? Acorn equity
What is meant by diversity of cultures : What is meant by diversity of cultures and explain how diversity can effect the relationship between customers and businesses in customer service.
Find out accumulated value of the fund : Melanie made deposits of $9,000 into a fund at the beginning of each quarter for the past 5 years. She then left the money to accumulate in the fund for another
Prepare the petty cash book for hay traders : Prepare the petty cash book for Hay Traders, with appropriate analysis columns to incorporate the transactions shown above
Prepare the bank reconciliation for the month of may : Two cheques for $15,000 and $20,000 which were issued for suppliers were not presented to the bank yet. Prepare the bank reconciliation for the month of May

Reviews

Write a Review

Financial Accounting Questions & Answers

  Describe why budgeting is important for a firm

Describe why budgeting is important for a firm. Do you think that a firm's budget should ever be violated (exceeded)? Explain your rationale.

  Show the effect of transaction on the accounting equation

Show the effect of transaction on the accounting equation - Gavin Corp. entered into the transactions

  Assess and evaluate and briefly discuss mining statement

Assess and evaluate and briefly discuss mining statement. consequently all expenditures of such activities should be accounted for as expenses as.

  Determine the share of profit for each partner

Prepare the journal entry to record the investment of both partners in the partnership. Determine the share of profit for each partner

  When direct costing is used cost of goods sold reflects

When direct costing is used, cost of goods sold reflects

  Compute depreciation expense and accumulated depreciation

Compute depreciation expense, accumulated depreciation, and book value for the first three years of the machine's life using the straight-line method and the double-declining-balance method.

  What is amount of liability relating to the lease agreement

What is the amount of liability relating to the lease agreement that Extreme would report in its December 31, 2015 statement of financial position?

  Calculate the cost of funds or wacc

Calculate the cost of funds or WACC if the cost of equity is 20%, the cost of debt is 7%, and the capital is 50% equity and 50% debt. The tax rate is 40%

  What the cost of delivering inventory to customers is

If Fresh Foods Company pays the remaining amount of invoice within the discount period, the amount paid should be? What cost of delivering inventory to customer

  What are the transactions occur for badger biking company

What are the transactions occur for Badger Biking Company during the month of June. Provide services to customers on account for $50,000.

  Dependent care tax credit for which they are eligible

Cindy and Glenn are married taxpayers who file a joint return. Both Cindy and Glenn work. During 2014, they had three young children for whom they paid $10,000 of qualifying child care expenses. What is the maximum and minimum child and dependent car..

  What are the expected cash collections in months

On average, 50% of credit sales are paid for in the current month, 30% in the next month, What are the expected cash collections in months

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