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A pension plan is obligated to make disbursements of $1 million, $2 million, and $1 million at the end of each of the next three years, respectively. The annual interest rate is 10%. If the plan wants to fully fund and immunize its position, how much of its portfolio should it allocate to one-year zero-coupon bonds and perpetuities, respectively, if these are the only two assets funding the plan? (DO NOT ROUND INTERMEDIATE CALCULATIONS. ROUND YOUR ANSWERS TO 2 DECIMAL PLACES.)
Investment in one-year zero-coupon bonds = ? (%)
Investment in perpetuity = ? (%)
Mary wants to have $300,000 in her account in 12 years. The account earns 6.24% interest. About how much must Mary withhold from her pay each month to reach her goal?
If the after-tax present value of buying equipment and using it for six years is $125,000, calculate the break-even after-tax yearly lease payment (seven payments) using a 8% real discount rate. (Assume that lease payments are made at the beginning o..
Assume that interest rates for one-year securities are expected to be 2 percent today, 4 percent one year from now, and 6 percent two years from now. Using only pure expectations theory, what are the current interest rates on two- year and three-year..
In addition to comparison with industry ratios, it is also helpful to analyze ratios using
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What is the price today of a $1,000 bond with a coupon rate of 10 percent and a current yield of 8 percent over 3 years? (round to the nearest whole dollar)
According to the FCIC report; during the Financial Crisis of 207-2009 The Fed, acting as lender of last resort, ensured that banks would not fail simply from a lack of liquidity.
An investment costs $1500 up front, but won’t start paying off until three years from now, at which time it will return $200 per year for a period of ten years. If your hurdle rate is 3%, does this investment make sense?
10-year, zero coupon bonds have more reinvestment risk than 10-year, 10% coupon bonds. A 10-year, 10% coupon bond has less reinvestment risk than a 10-year, 5% coupon bond (assuming all else equal). The price of a 20-year, 10% bond is less sensitive ..
A static budget report is appropriate for. The flexible budget report includes all of the following sections except. Controllable fixed costs are deducted from the contribution margin to arrive at. The numerator in computing return on investment is
A stock price is currently $50. Over each of the next two 3-month periods it is expected to go up by 7% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. The strike price is $52 for a European call. alue the opti..
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