What is the extent of the true unfunded liability

Assignment Help Financial Management

Reference no: EM131850404

1. The promised cash flows of three securities are listed here. If the cash flows are risk-free, and the risk-free interest rate is 5%, determine the no-arbitrage price of each security before the first cash flow is paid.

2. After reading your company’s annual report you decide to compute the total obligation of the firm’s defined benefit retirement plan Fund. After some research you determine that your company’s promised pension payments amount to $10 million dollars annually, and you expect this obligation to grow at 2% per year. You determine that the riskiness of this obligation is the same as the riskiness of the company’s debt. Based on the pricing of that debt you determine that the correct discount rate for the Fund’s liabilities is 3% per annum. Currently, based on actuarial calculations using 8% as the discount rate, the plan is neither over nor underfunded — the value of the liabilities exactly matches the value of the assets. What is the extent of the true unfunded liability?

Reference no: EM131850404

Questions Cloud

What was initial margin requirement : What was Suzettes initial margin requirement? Will she receive a margin call after the price drop?

How do you plan on using the tools and techniques gained : How do you plan on using the tools and techniques gained in your educational journey to become successful as a manager?

Videocassette recorders at discount prices : The manager of the local National Video Store sells videocassette recorders at discount prices. If the store does not have a video recorder

Discuss models of organizational power : In this week's discussion question, you are asked to examine strategies, theories, and models of organizational power and influence in order to understand.

What is the extent of the true unfunded liability : The value of the liabilities exactly matches the value of the assets. What is the extent of the true unfunded liability?

What is causality : In your own words, what is causality? What specific criteria have you used to establish causality?

Describe arbitrage opportunity-calculate arbitrage profit : Describe the arbitrage opportunity (including actions / timings / cash flows) and calculate the arbitrage profit.

Purpose of driving a car in many states : 1."intoxicated" for purpose of driving a car in many states, means having a blood-alcohol Content of 0.1%(001)or greater

What was the legal issue in case and what the court decide : Case 1 - Johnson v. Transportation Agency, Santa Clara County. What was the legal issue in this case? What did the Supreme Court decide

User Account

All Pages