What is the duration of cash flows

Assignment Help Chemistry
Reference no: EM131703703

Consider the following cash flows. All market interest rates are 12% right now.

Year 0 1 2 3 4

Cash Flow 160 170 180 230

(a) What price would you pay for these cash flows? What total wealth do you expect after 2.5 years if you sell the rights to the remaining cash flows? Assume interest rates remain constant. (Hint: Assume that you can continuously compound. For example, a cash flow expected in a half year would be discounted with (1 +i)^-0.5)

(b) What is the duration of these cash flows?

(c) Immediately after buying these cash flows, all market interest rates drop to 11%. What is the approximate impact on your total wealth right now?

(d) Again, consider the drop to 11% interest rates. What is the expected wealth you will have after 2.5 years, with these new lower interest rates? How does that compare to your answer in (a)? How does this compare to your answer in (c)? Why do you think there is this difference?

Reference no: EM131703703

Questions Cloud

Relationship between government borrowing and budget deficit : How does government borrowing crowd out investment? What is the relationship between government borrowing and budget deficits?
How jefferson and successors implemented republicanism : How Jefferson and successors implemented Republicanism, how Federalists fought them? Federalism and Republicanism with significant events and political figures.
What do you consider to be the most pressing issues : What do you consider to be the most pressing issues, and how should society go about addressing them? Consider any one of the articles.
Describe the marginal products of each factor : Describe the marginal products of each factor and how the value of the marginal product of each factor is determined
What is the duration of cash flows : What price would you pay for these cash flows? What total wealth do you expect after 2.5 years if you sell the rights to the remaining cash flows?
How are you going to ensure you do not let your biases : How might these affect your final paper, and how are you going to ensure you do not let your biases prevent you from writing a well written argument?
Discuss the anti-war movement : Rosenquist's painting was created during the Vietnam War era and eventually became associated with the anti-war movement
What is the duration of bond : You just purchased a coupon bond with face value $1000, 6% coupons, and three years remaining to maturity. Assume that all market interest rates are 7 %.
Discussion the various leadership styles and characteristics : Discuss how a leader may be different than a manager. Incorporate in your discussion the various leadership styles and characteristics

Reviews

Write a Review

Chemistry Questions & Answers

  State what is the concentration of h+

If you have an acidic solution with a pH of 4.6, what is the concentration of H+ (or [H+]). For the solution in (a) what is the concentration of OH-

  Define the rate at which ph changes when hcl added in buffer

Compare the rate at which pH changes when HCl is added to the buffer solution the the rate of change when no buffer or base is present (distilled water).

  State what is the ph of the final solution

What is the pH of the final solution? Answer IS 7.58 Q 3.) What additional volume of 10.0 M HCl would be needed to exhaust the remaining capacity of the buffer after the reaction described in Part B?

  Find the heat of combustion in kjg for each gas these

the molar heats of combustion of three hydrocarbon gases arech4 methane- 890.0 kjmolc2h6 ethane- 1560.0 kjmolc3h8

  Explain a piece of gold has the shape of a cube

A piece of gold has the shape of a cube- each of its sides measures 5.00 cm. the volume of a cube is length x width x height. if the density of gold is 10.5 g/cm^3, what is the mass in grams of the piece of gold?

  Define what is the relative rate of change of each species

The rate of the subsequent reaction is 0.720 M/s. Define what is the relative rate of change of each species in the reaction. A + 4B yields 2C

  Calcium fluoride is added to water until the solution

Calcium fluoride is added to water until the solution is saturated. The calcium ion concentration in the saturated solution is 2.1 x 10-4 M. Compute the equilibrium constant for the dissolution of calcium fluoride.

  Potassium weighing 391 grams was carefully placed in a 1

potassium weighing 3.91 grams was carefully placed in a 1 liter beaker filled with water. all of the potassium reacted

  Find another example of a solid-phase reagent

Find another example of a solid-phase reagent that is used in organic synthesis, and give an example of a specific reaction where it has been used. In this case, what advantage does the solid-phase reagent provide over the analogous solution-phase..

  Explain what mass of oxygen gas would be consumed

What mass of oxygen gas would be consumed by the complete combustion of 7.5g of a mixture of propane (C3H8) and butane (C4H10) in the mole ratio of C3H8 / C4H10 = 1.33

  Define what is the molar mass of the gas

A newly discovered gas has a density of 2.39g/L at 296K and 715 mm Hg. What is the molar mass of the gas

  A 295- flask contains pure helium at a pressure of 757 a

a 295- flask contains pure helium at a pressure of 757 . a second flask with a volume of 460 contains pure argon at a

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd