What maturity bonds must purchase

Assignment Help Financial Accounting
Reference no: EM132755606

A company has to meet obligations of $8 million in 1 year and $6 million in four years from now and would like to invest in bonds today to allow it to cover the payments. The yield curve is flat at 8 per cent. The management of the company is concerned about the reinvestment risk as interest rates can change.

Required:

Problem a) How should the company's portfolio of investment be structured to minimise interest rate risk?

Problem b)
If the company wants to immunize its obligations with a portfolio of zero-coupon bonds, what maturity bonds must it purchase?

Problem c) What must be the total face value of the zero-coupon bonds?

Reference no: EM132755606

Questions Cloud

Provide the journal entry to record the payroll tax : Provide the journal entry to record the payroll tax expense for the period. If an amount box does not require an entry, leave it blank
Discuss current ethical issue : Discuss a current ethical issue in the business world that arises out of intellectual property.
Calculate the depreciation tax shield for project in year : Your firm needs a computerized machine tool lathe that costs $50,000, Calculate the depreciation tax shield for this project in year 1
Advent of the gig economy : Uber is largely hailed as the advent of the gig economy, which is the idea that people will not work for any one employer,
What maturity bonds must purchase : If the company wants to immunize its obligations with a portfolio of zero-coupon bonds, what maturity bonds must it purchase?
At what price is investor willing to buy Cipamingkis bond : If the investor asks for a 12% yield, at what price is the investor willing to buy the PT Cipamingkis bond and what is the effective annual yield of the bond
CIS7031 Programming for Data Analysis Assignment : CIS7031 Programming for Data Analysis Assignment Help and Solution, Cardiff University - Assessment Writing Service - develop and implement solutions
What is the correlation between the two stocks : What is the correlation between the two stocks? Interpret the result. Your portfolio has had a variance of 25% over the past few years.
What is the journal entry recorded for the issuance : On January 1, Staple Company issued bonds with a face value of $200,000. What is the journal entry recorded for the issuance

Reviews

Write a Review

Financial Accounting Questions & Answers

  Difference between personal and corporate database solution

Do you think that Access can serve as a corporate database solution, or is it strictly a personal database solution? What might be the difference between a personal and corporate database solution?

  Net present value and irr of the project

The cost of capital for this type of equipment is 21%. Need is the net present value and IRR of the project.

  Make and allocate purchase price between two deliverables

Prepare XYZ's journal entries for each of December 31, 20X4, January 1, 20X5, December 31, 20X5, January 1, 20X6, December 31, 20X6, and January 1, 20X7

  Examine the five-year trend information

Examine the five-year trend information and make a list of any indicators that are negative.

  What is the overall tax rate on crocker and companys pre-tax

Crocker and Company (CC) is a C corporation. For the year, CC reported taxable income of $566,500. At the end of the year, CC distributed all its after-tax.

  Discuss what accounting policies and adjusting entries

discuss what accounting policies and adjusting entries are applicable to these accounts. Why are they important to Lyric opera‘s management?

  Compute the receivables turnover

Compute the Receivables turnover, Average number of days required to collect the accounts receivable, Average days in inventory

  Birdie co. makes three products

Birdie Co. makes three products, A, B and C. They have a constrained resource - machine hours. There are only 17446 machine hours available a month.

  Which factor believe is most significant in today busines

Assess the external and internal factors Indicate which factor believe is most significant in today's business environment. Provide support for your rationale.

  How manynbsp unitsnbsp were started and completed from the

how manynbsp unitsnbsp were started and completed from the given data.honeybutter inc. manufactures a product that goes

  Make both a common size and a regular balance sheet

Find why you need to spend the time and money to have your analyst create both a common size and a regular balance sheet and income statement.

  Reported a retained earnings balance

Flam Co. reported a retained earnings balance of $400,000 at December 31, 2014. In August, 2015, Flam determined that insurance premiums of $60,000 for the three-year period beginning January 1, 2014, had been paid and fully expensed in 2014. Flam ha..

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