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Question: You will be paying $11,200 a year in tuition expenses at the end of the next 2 years. Bonds currently yield 6%.
a. What is the present value and duration of your obligation?
b. What maturity zero-coupon bond would immunize your obligation?
Suppose you buy a zero-coupon bond with value and duration equal to your obligation.
c-1. Now suppose that rates immediately increase to 8%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation?
c-2. Now suppose that rates immediately falls to 4%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation?
If inflation is expected to average 1.5 % points over both the next ten yrs and thirty years, determine the maturity risk premium for the thirty-yr bond over the 10-year bond.
Suppose that the risk free rate is 5%, the expected market return is 10%, the beta of firm XYZ is 2, the current dividend that XYZ has just paid is 1 and dividends are expected to grow at a rate of 10% per year. What should be the price of the fir..
Indicate the effect of the following on the cash cycle: Accounts payable period goes up Decrease Increase No change 1 points QUESTION 2 Indicate the effect of the following on the operating cycle: Customers take longer to make the payment No change I..
A company's financial statements consist of the balance sheet, income statement, and statement of cash flows. Describe what each statement tells us.
assume you just deposited 1000 into a bank account. the current real interest rate is 2 and inflation is expected to
What are the optimal investment strategy according to the efficient market hypothesis? Explain your answer.
You're thinking of purchasing a house. The house costs $350,000. You have $50,000 in cash which you can use as a down payment on house, but you need to borrow the rest of purchase price.
Determine the annual net (pretax) benefits to Great Lakes Oil of establishing a lockbox system with the Salt Lake City bank. Which of the two lockbox systems (if any) should the firm select?
A company's 8% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $638.11.
Determine the annual percentage yield for an annual percentage rate of 7% for quarterly and monthly compounding periods.
If the bond matures in 5 years and interest is paid semiannually, what is the YTM?
the firmrsquos stock is currently selling for 57.50 per share. the firm expects to pay a 3.40 dividend at the end of
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