Solution-Riskless investment with guaranteed return

Riskless investment with guaranteed return

Assignment Help Finance Basics

Reference no: EM131520179

Question 1: If the pension plan invests $95 million today in 10-year US Treasury bonds (riskless investment with guaranteed return) at an interest rate of 3.5 percent a year, how much will it have by the end of year 10?

Question 2: If the pension plan needs to accumulate $14 million in 13 years, how much must it invest today in an asset that pays an annual interest rate of 4 percent?

Question 3: How many years will it take for $197 million to grow to be $554 million if it is invested in an account with a quoted annual interest rate of 5 percent with monthly compounding of interest?

Question 4: The pension plan also invests in physical assets. It is considering the purchase of an office building today with the expectation that the price will rise to $20 million at the end of 10 years. Given the risk of this investment, there should be a yield of 10 percent annually on this investment. The asking price for the lot is $12 million. What is the annual yield (internal rate of return) of the investment if the purchase price is $12 million today and the sale price 10 years later is $20 million? Should the pension plan buy the office building given its required rate of return?

Question 5: The pension plan is also considering investing $70 million of its cash today at a 3.5 percent annual interest for five years with a commercial bank. The bank in return will pay an annuity due at the beginning of year 6 for the next 15 years. How much will the annual payments be from years 6 to 21, if the rate at which these payments are discounted is also 3.5 percent?

Question 6: The pension plan is about to take out a 10-year fixed-rate loan for the purchase of an information management system for its operations. The terms of the loan specify an initial principal balance (the amount borrowed) of $4 million and an APR of 3.75 percent. Payments will be made monthly. What will be the monthly payment? How much of the first payment will be interest, and how much will be principal? Use the Excel PMT function to provide the answers to these questions.

Be sure to show your calculations in Excel.

Reference no: EM131520179

Questions Cloud

What does the constitution reveal about the religious views : With an emphasis upon religious fervor and temperament. What does the Constitution reveal about the religious views of America's Founding Fathers? In what way?

Should high-end designer apparel brands like gucci : Should high-end designer apparel brands like Gucci, Chanel, or Prada sell their goods direct to consumers through the Internet? Why or why not

Loan period and no compensating balance requirement : An 18% rate of interest with interest paid at the end of the loan period and no compensating balance requirement

Calculate the correct ending balance of cash : At the end of February, Howard Productions' accounting records reveal a balance for cash equal to $19,175. However, the balance of cash in the bank at the end.

Riskless investment with guaranteed return : If the pension plan invests $95 million today in 10-year US Treasury bonds (riskless investment with guaranteed return) at an interest rate of 3.5 percent year.

Identify at least two tools that can help a marketer : Identify at least two tools that can help a marketer to define the target market and explain why that information can be used in the development.

How obstructive sleep apnea leads to myocardial infarction : Describe how obstructive sleep apnea leads to the following: Myocardial infarction and Childhood hyperactivity

Major goal of developing a single revenue : FASB and IASB released a joint exposure draft with a major goal of developing a single revenue model that would be comprehensive and principles-based.

Estimate of the stock current price : It is expected to grow at 15% over the next year and then at 5% per year thereafter. The required rate of return on the stock is 8%.

User Account

All Pages

Riskless investment with guaranteed return

Reference no: EM131520179

Reference no: EM131520179

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT