What must be the face value of the two zeros

Assignment Help Finance Basics
Reference no: EM132540224

You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are going to closely resemble level perpetuities of $1.1 million per year. The interest rate is 8%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds.

a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? (Do not round intermediate calculations. Enter your answers in millions. Round your answers to 1 decimal place.)

Five-Year

Twenty-Year

b. What must be the face value of each of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.)

Five-Year

Twenty-Year

Reference no: EM132540224

Questions Cloud

What yield to maturity is the bond offering : What yield to maturity [interest rate] is the bond offering? Assume interest payments are paid semi-annually, and solve using semi-annual compounding.
Search engines and electronic marketing : Product Idea and Search Engines/Electronic Marketing. Discuss the potential customers for this product/service
Define the mobile web and corporate governance : Define and describe the mobile web. Describe the different generations of cell phones. Define corporate governance.
Actionable plan including executive-level support : Create an actionable plan including executive-level support and budget allocation to ensure security controls can be rapidly updated
What must be the face value of the two zeros : What must be the face value of each of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 deci
Effective annual yield to maturity : Find the bond equivalent and effective annual yield to maturity of the bond for the following bond prices.
Present value and duration of obligation : You will be paying $10,500 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%.
Threat modeling : A new medium-sized health care facility just opened and you are hired as the CIO. The CEO is somewhat technical and has tasked you with creating a threat model.
Hiawatha total assets turnover ratio : Hiawatha Corp's sales last year were $38,000 while total assets were $16,000. What was Hiawatha's total assets turnover ratio (TATO)?

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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