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MATCHING ASSETS AND LIABILITIES
A corporation is going to have to pay a debt of 1200000 after one year, a debt of 1500000 after 2 years, and 2000000 after 3 years.
In order to set up an absolute matching strategy to pay these debts, the corporation may purchase:
A one year bond with 4% annual coupons
A two year bond with 2% annual coupons
A three year bond with 3% annual coupons
The spot rates are s1=5%, s2=4%, and s3=3%. Find the amount the corporation will have to invest now in each of these bonds to set up this strategy. What is the yeild rate for the investment in this strategy?
In order to replicate the payoff of your two call options at the expiration date that you selected, how many shares of stock should you buy today, and how much should you borrow at the risk-free rate? Calculate and explain.
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Curtis Corporation's noncallable bonds currently sell for $1,165. They have a 15-year maturity, an annual coupon of $95, and a par value of $1,000. What is their yield to maturity?
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Fixed assets are often estimated incorrectly by the percent of sales method because
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RileyCorp. has earnings after taxes of $210,000. Interest expense for the year was $40,000; preferred dividends paid were $45,000; and common dividends paid were $30,000. Taxes were $22,700. The firm has 100,000 shares of common stock outstanding. Ea..
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