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We have earlier studied that the investor may have to carry cash for some time because of discrepancies arising between the timing of the bond's cash-flow and the liability. Suppose we assume that he can borrow for a short time period, then he can depend on cash flow occurring after a liability to cover it. Constructing a bond portfolio with cash-flow around rather than prior to the maturities of the liabilities is less restrictive. Hence it should be easier and cheaper. This strategy is based on the assumption of cost of borrowing cash. If the cost is actually higher than the assumed cost, then the risk of being short to fund the liabilities may arise.
Callable bonds must be avoided as they may bring in uncertainty in the bond portfolio cash flow.
Excluding default risk.
Assume a 10% discount rate with respect to both the bonds.
Define risk. Examine the need for assessing the risks in a project
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Explain and derive the international Fisher effect. Answer: The international Fisher effect can be acquired by combining the Fisher effect and the relative version of purchasi
Question: You have been appointed as the head of the treasury of Platza International, an automobile firm with many subsidiaries abroad. The management of Platza International
How does continuous compounding benefit an investor? The effect of enhancing the number of compounding periods per year is to increase the future value of the investment. The
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Which type of financing is appropriate to each firm?
1. Which of the following statements concerning the cash flow production cycle is true? a) The profits reported in a given time period equal the cash flows generated. b) A company’
discuss the applicability of an operating cycle of a vegetable growing business
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