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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.
Explain the Baumol Model
Two years ago, Randburg Ltd needed to accumulate a total of R250000 by the end of 5 years to acquire new imported machinery. To do so Randburg Ltd makes quarterly-annual deposits i
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how is operating cycle applicable to poultrybusiness in Uganda (broilers)
1. Increasing the number of indirect-cost pools is guaranteed to sizably increase the accuracy of product or service costs.do you agree? Support your anser using examples 2. The
Q. What is Cash Credit? A cash credit is an arrangement by which a bank allows his customer to borrow money up to a certain limit against some tangible securities or guarantees
(a) Find the nominal rate of interest j compounded quarterly which is equivalent to a 5% e ective rate of interest. (b) Which one will deliver a higher future value on a deposit
The securing of the working capital needed for the support of raises in accounts receivable and inventory related with an organizations initial expansion time.
Types of Treasury Bills Treasury bills are issued at various maturities, generally up to one year. Thus, they are useful in managing short-term liquidity. At present, the GOI (
Market participants' measure the default risk of an issue on the basis of the credit ratings that the credit rating agencies assign to the issues. Once rating is
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