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Portfolio A consists of a 1-year zero-coupon bond with a face value of $2,000 and a 10-year zero-coupon bond with a face value of $6,000. Portfolio B consists of a 5.95-year zero-coupon bond with a face value of $5,000. The current yield on all bonds is 10% per annum.
(a) Show that both portfolios have the same duration.
(b) Show that the percentage changes in the values of the two portfolios for a 0.1% per annum increase in yields are the same.
(c) What are the percentage changes in the values of the two portfolios for a 5% per annum increase in yields?
For a new product, sales volume in the first year is estimated to be 100,000 units and is projected to grow at a rate of 7% per year. The selling price is $10 and wil increase by $0.50 each year. Develop a spreadsheet model to calculate the net prese..
Suppose you make annual deposits of $ 3,000 in an account that pays annual compound interest of 4.5 % over the investment period. How much will be in the account after the ninth deposit ?
Explain why setting a higher discount rate is not a cure for a upward-biased cash flow forecasts.
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An investment under consideration has a payback of eight years and a cost of $865,900. Assume the cash flows are conventional. If the required return is 10 percent, what is the worst-case Net Present Value?
The pans can be upgraded to tri-ply for $2,000. The tri-ply pans could be sold for $3,500 in total. If the pans are scrapped, they could be sold for $1,250. Which alternative should the Shallow Pan Company accept and what is the relevant profit from ..
six years from now you will be inheriting 100000. what is this inheritance worth to you today if you can earn 6.5
What are convexity violations for the call and put premiums? What spread you would you use to effect arbitrage? Demonstrate that the spread position is an arbitrage.
A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3 years. If you pay the entire bill immediately, you can take a 10% discount from the purchase price.
A developing country wants to become more global, hoping to increase the pace of its economic growth and improve the quality of life for its people. It wants to achieve this by attracting foreign direct investment.
assume a portfolio has the probability of returning 6 9 10 or 15 with the likelihood of 20 percent 30 percent 25
Assume (1) that NWC was operating at full capacity in 2008 with respect to all assets, (2) that all assets must grow at the same rate as sales, (3) that accounts payable and accrued liabilities also will grow at the same rate as sales, and (4) that t..
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