What maturity bond must it purchase

Assignment Help Financial Management
Reference no: EM131927995

An insurance company must make payments to a customer of $8 million in 1 year and $4 million in 4 years. The yield curve is flat at 9%.

a.  If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? (Do not round intermediate calculations. Round your answer to 4 decimal places.)

Maturity of zero coupon bond years

b. What must be the face value and market value of that zero-coupon bond? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places. Omit the "tiny_mce_markerquot; sign in your response.)

Face value $

Market value $

Reference no: EM131927995

Questions Cloud

How much should the owner of the machine charge : How much should the owner of the machine charge per hour of use, if it is expected that the machine will operate 1,500 hours per year?
Cumulative distribution function : Let X be a continuous random variable with the probability distribution function f(x) and the cumulative distribution function F(x).
What must be the forward price of the pound for delivery : what must be the forward price of the pound for delivery 1 year from now?
Write about economic history leading up to neoliberalism : Write 800-1000 words on following: Tourism and Globalization Among the Tharu of Nepal by Arjun Guneratne and Kate Bjork.
What maturity bond must it purchase : An insurance company must make payments to a customer of $8 million in 1 year and $4 million in 4 years. The yield curve is flat at 9%.
What is the probability that you will lose entire investment : What is the probability that you will lose your entire investment if the returns among the 10 stocks are uncorrelated (independent)?
What is the expected value of playing game : What is the expected value of playing this game? (round to the nearest whole number)
How much is transaction cost per dollar of stock controlled : How much is the transaction cost per dollar of stock controlled by the futures contract?
What is the irr on the incremental investment : A typical 2.200 square foot home costs $140 per square foot to build with wood framing in Vermont and costs $175 per month (on average) to heat or cool.

Reviews

Write a Review

Financial Management Questions & Answers

  Which one of the following is correct given this information

A new project with a life of 10 years, costs $210,000 and is expected to generate annual net cash inflows of $x each year.

  Calculate investors realized percentage holding period

She expects the price of the Venus shares to fall to about $38 over the next year. Calculate the investor's realized percentage holding period return.

  Concerning the change in working capital is most accurate

J.B. Enterprises purchased a new molding machine for $85,000. Which of the following statements concerning the change in working capital is most accurate?

  What is the smallest expected loss for your portfolio

What is the smallest expected loss for your portfolio in the coming month with a probability of 5 percent?

  Managers to act in the best interests of the shareholders

Which of the following are possible mechanisms applicable to large corporations that motivate managers to act in the best interests of the shareholders?

  Calculate the net operating income of the property

Calculate the net operating income (NOI) of the property, assuming the hotel is 70% occupied

  Neither betas nor the risk-free rate change

CCC Corp has a beta of 1.5 and is currently in equilibrium. The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%. Now the required return on an average stock increases by 30.0% (not percentage poin..

  Calculate the rate of return on the stock of this firm

Calculate the value of this firm. Calculate the rate of return on the stock of this firm.

  Some financial services stock for long-term capital loss

Hector is a single taxpayer in the 28% marginal tax bracket. In 2014, he sold stock shares for a long-term capital gain of $8,500. He also sold some financial services stock for a long-term capital loss of $2,000. How much will his net capital gains ..

  Create portfolio of financial stocks

Margo would like to create a portfolio of financial stocks. The goal is to maximize expected return and minimize risk (standard deviation of the portfolio’s return). Should the stocks return in the portfolio highly correlated or negatively correlated..

  Calculate bep-roi-roe and tie ratios for fictitious firm

EBIT was $55 million in 2016, and is expected to remain constant for 2017. The firm is all equity financed, and there are 15 million shares outstanding. The corporate tax rate is 37.5%, the risk-free rate is 3.5% and the market risk premium is 4%. Ca..

  Calculate the base-case cash flow and npv-break-even point

We are evaluating a project that costs $1,120,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Calculate the accounting break-even point. Calculate the base-case cash ..

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