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Pension funds pay lifetime annuities to recipients. If a firm remains in business indefinitely, the pension obligation will resemble a perpetuity. Suppose that you are managing a pension fund with obligations to make perpetual payments of $4 million per year to beneficiaries. The yield to maturity on all bonds is 10%.
Problem a) Assume that the duration of 5-year maturity bonds with coupon rates of 12% (paid annually) is 4 years, and the duration of 20-year maturity bonds with coupon rates of 6% (paid annually) is 14 years. Calculate how much of each of these two coupon bonds (in market value) you will want to hold in order to both fully fund and immunize your obligation.
Problem b) Calculate the total par value of your holdings in the 20-year coupon bond.
Annual interest rate, with interest payable semi-annually. The market interest rate is 4%. How much can Pharoah expect to receive for the sale of these bonds
Calculate the total cost per year to order and carry this item. How much is the discount that the supplier will offer WZY company to result in a net benefit
Peters, Chong, and Aaron are dissolving their partnership. Their partnership agreement allocates each partner an equal share of all income and losses. The current period's ending capital account balances are Peters, $84,000;
Determine the breakeven point in sales dollars. 2. Determine the required sales in dollars to earn a before-tax profit of $7,250,000. 3. What is the breakeven point in sales dollars if the variable cost increases by 10 percent?
Firenze Company developed a specialized banking application software program that it licenses to various financial institutions through multiple-year agreements. On January 1, 2014, these licensing agreements have a fair value of $985,000 and represe..
The annual yield on the company's debt is 6% and the required rate of return on the stock is 14.6%. What is company's WACC? Assume the tax rate is 30%
Calculate the cost of the ending inventory and the cost of goods sold for each cost flow assumption, using a perpetual inventory system. Assume a sale of 400 units occurred on May 15 for a selling price of $8 and a sale of 440 units on June 27 for 49..
Sydney Mira provides two financial services through two seperate operating divisions (O1 and O2). There two operating divisions require the services of three internal service departments (S1, S2, S3). Using the direct allocation method, calculate the..
Draw up the net cash provided by operating activities section of the company's statement of cash flows for the year ended December 31, 2022.
Which one is better in order to reduce the income tax in a deflationary economy, where the prices are continuously going down and why?
The next payday, January 5, the firm paid $2,500 in wages. The company makes reversing entries. The proper entry on January 5 includes
What is the profitability index for the set of cash flows if the relevant discount rate is 15 percent? (Do not round intermediate calculations)
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