Obligation using one-year zero-coupon bond and perpetuity

Assignment Help Financial Management

Reference no: EM131343136

You will be paying $5,000 a year in tuition expenses at the end of the next 3 years. Bonds currently yield 30%. What is the present value and curation of your tuition obligation? and if you plant to fund your obligation using a one-year zero-coupon bond and a perpetuity, how much of each of these bonds (in market value) will you want to hold to both fully fund and immunize your obligation?

Reference no: EM131343136

Questions Cloud

Currently rents bottling machine : Big Rock Brewery currently rents a bottling machine for $54,000 per? year, including all maintenance expenses. Should Big Rock Brewery continue to? rent, purchase its current? machine, or purchase the advanced? machine? To make this? decision, calcul..

What must expected return on the market be : A stock has an expected return of 10.5 percent, its beta is 1.00, and the risk-free rate is 6.25 percent. What must the expected return on the market be?

The amount of the aftertax salvage value of the equipment : Kingston Equipment is considering a project that will require the purchase of $1,480,000 in new equipment. The equipment will be depreciated straight-line to a zero book value over the 7-year life of the project. What is the amount of the aftertax sa..

What was total real return on investment : You bought one of Great White Shark Repellant Co.’s 5.4 percent coupon bonds one year ago for $1,053. These bonds make annual payments and mature 12 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is..

Obligation using one-year zero-coupon bond and perpetuity : You will be paying $5,000 a year in tuition expenses at the end of the next 3 years. Bonds currently yield 30%. What is the present value and curation of your tuition obligation? and if you plant to fund your obligation using a one-year zero-coupon b..

Analyze the capital asset pricing model : Analyze the Capital Asset Pricing Model (CAPM). Using the course text and an article from ProQuest as references, address the following: Explain how the CAPM assists in measuring both risk and return. Explain how the CAPM assists in calculating the w..

What is the drop in value of share of summit systems stock : Summit Systems has an equity cost of capital of 11.5%, will pay a dividend of $1.00 in one year, and its dividends had been expected to grow by 7.0% per year. What is the drop in value of a share of Summit Systems stock based on this information? If ..

Profitability index to evaluate mutually exclusive project : We can use NPV to evaluate two mutually exclusive repeated projects. To make an investment decision based on IRR, we do not need to know the appropriate discount rate. We can use profitability index to evaluate mutually exclusive project. The operati..

Explain business debt interest deductibility : Please explain business debt interest deductibility? A non-dividend-paying stock has a futures contract with a price of $69.2 and a maturity of two months. If the risk-free rate is 3.4 percent, what is the price of the stock? Suppose the 180-day S&P ..

User Account

All Pages