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A pension plan is obligated to make disbursements of $1.2 million, $2.2 million, and $1.2 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.)
Portfolio Investment in one-year zero-coupon bonds %:
Investment in perpetuity %:
A firm has four open positions on its board of directors. How many shares do you need to own to guarantee your own election to the board if the firm has 387,500 shares of stock outstanding and uses cumulative voting? Each share is granted one vote.
ABC Waterhouse's free cash flow next year will be $250 million and it is widely expected to grow at a 5 percent annual rate indefinitely. The company's weighted average cost of capital is 11 percent, the market value of its liabilities is $2.5 billio..
The order came in the right after the first of the year, lowering your planned revenue numbers and the bonuses of your very deserving employees. It doesn't seem fair. What should you do?
A bond has a $3,000 par value, 20 years to maturity and sells for $2,500. What is its yield to maturity? What is the bond's current market price?
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If an asset moves generally in the opposite direction of an index then
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When converting annual data to daily data or vice versa in these problems, assume there are 365 days per year. Suppose that, as the result of a recession, annual credit sales decline by 10 percent to $18 million, and customers delay their payments to..
What are the conditions imposed on a debt issues that are designed to protect bondholders called? collatreal agreements, default provisions, protective covenants or vanilla wrapper
Describe the various circumstances under which May & Marty could take responsibility for the work of Dey & Dee and make no reference to Dey & Dee's examination of BGI-Western in its own report on the consolidated ?nancial statements of BGI.
Suppose Baa-rated bonds currently yield 7.1%, while Aa-rated bonds yield 5.1%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.0%. What would happen to the confidence index?
Explain the difference between selling a forward contract for delivery at $100 in one year, buying a put option struck at $100 expiring in one year, and selling a call option struck at $100 expiring in one year.
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