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You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are essentially going to resemble level perpetuities of $0.8 million per year. The interest rate is 10%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds. a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? (Do not round intermediate calculations. Enter your answers in millions. Round your answers to 1 decimal place.) Market Value Five-year $ million Twenty-year $ million b. What must be the face value of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) Face Value Five-year $ million Twenty-year $ million
fixed coupon bond , 20 years left until maturity , coupon rate 6% , yield of bond 6.2% , paid semi annual. What is bond's price? fixed coupon bond, 12 years left until maturity , coupon rate 7% , price of bond is $1060.00 , paid semi annually. What i..
Maria Sanchez needs $9540 in three years to put a new roof on our house. To meet this goal she deposit money into an account today that pays 4.75% compounded monthly. Find the amount she must invest today to have $9540 in three years?
Blue Crab, Inc. plans to issue new bonds, but is uncertain how the market would set the yield to maturity. The bonds would be 29-year to maturity, carry a 8.02 percent annual coupon, and have a $1,000 par value. Blue Crab, Inc. has determined that th..
A firm has total assets of $1,920,000. It has $828,000 in long-term debt. The stockholders equity is $628,000. What is the debt to total asset ratio?
Suppose that an investor is considering the purchase of a bond due to mature in 30 years, carrying an 8 percent coupon rate (coupons are paid semi-annually). This security is available for purchase at a current market price of $975. The bond has a pa..
Under which circumstances does the investor make profit? When will the option be exercised?- Draw a diagram to show the variation in the investors profit and the share price at the maturity of the option.
A U.S. company can borrow 12,000 pounds in Great Britain for 4% interest, paying back 12,480 pounds in one year. Alternatively, the U.S. company can borrow an equivalent amount of U.S dollars in the United States and pay 8% interest. Assuming capital..
Movements in Cross-Exchange Rates. Last year a dollar was equal to 7 Swedish kronor, and a Polish zloty was equal to $.40. Today, the dollar is equal to 8 Swedish kronor, and a Polish zloty is equal to $.44. By what percentage did the cross-exchange ..
CAR Inc. will be liquidated in one year. The value of CAR’s assets is currently $650 million, and next year it will be either $825 million or $400 million. Before shareholders can be paid next year, CAR will have to repay $500 million of debt. What i..
The Whilst Co. paid consultants $10,000 to conduct a feasibility study for a new project. The project’s estimated annual sales are $200,000 and costs are $102,300. The company requires a 14% rate of return and is in the 34% marginal tax bracket. Usi..
How much money will they have accumulated 30 years from now? If their goal is to retire with $710,000 of savings, how much extra do they need to save every year
What is the operating ratio? Capacity ratio?
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