Question
In: Finance
You will be paying $10,700 a year in tuition expenses at the end of the next...
|
You will be paying $10,700 a year in tuition expenses at the end of the next two years. Bonds currently yield 10%. |
| a. |
What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.) |
| Present value | $ |
| Duration | years |
| b. |
What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Future redemption value" to 2 decimal places.) |
| Duration | years |
| Future redemption value | $ |
| You buy a zero-coupon bond with value and duration equal to your obligation. |
| c-1. |
Now suppose that rates immediately increase to 11%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Net position changes by | $ |
| c-2. |
What if rates fall to 9%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
| Net position changes by | $ |
Solutions
jeff jeffy answered 7 months agoRelated Solutions
You will be paying $11,000 a year in tuition expenses at the end of the next...
You will be paying $11,000 a year in tuition expenses at the end
of the next two years. Bonds currently yield 9%.
a. What is the present value and duration of your
obligation?
b. What maturity zero-coupon bond would immunize your
obligation?
c. Suppose you buy a zero-coupon bond with value and duration
equal to your obligation. Now suppose that rates immediately
increase to 10%. What happens to your net position, that is an
increase or decrease in value, to...
You will be paying $11,400 a year in tuition expenses at the end of the next...
You will be paying $11,400 a year in tuition expenses at the end
of the next two years. Bonds currently yield 7%.
a. What is the present value and duration of
your obligation? (Do not round intermediate calculations.
Round "Present value" to 2 decimal places and "Duration" to 4
decimal places.)
b. What maturity zero-coupon bond would
immunize your obligation? (Do not round intermediate
calculations. Round "Duration" to 4 decimal places and "Face value"
to 2 decimal places.)
...
You will be paying $11,000 a year in tuition expenses at the end of the next...
You will be paying $11,000 a year in tuition expenses at the end
of the next two years. Bonds currently yield 10%.
a. What is the present value and duration of your obligation?
(Do not round intermediate calculations. Round "Present value" to 2
decimal places and "Duration" to 4 decimal places.)
b. What is the duration of a zero-coupon bond that would
immunize your obligation and its future redemption value? (Do not
round intermediate calculations. Round "Duration" to 4 decimal...
You will be paying $12,800 a year in tuition expenses at the end of the next...
You will be paying $12,800 a year in tuition expenses at the end
of the next two years. Bonds currently yield 8%.
a. What is the present value and duration of your
obligation? (Do not round intermediate calculations. Round
"Present value" to 2 decimal places and "Duration" to 4 decimal
places.)
b. What is the duration of a zero-coupon bond that
would immunize your obligation and its future redemption value?
(Do not round intermediate calculations. Round "Duration"
to 4 decimal...
You will be paying $10,600 a year in tuition expenses at the end of the next...
You will be paying $10,600 a year in tuition expenses at the end
of the next two years. Bonds currently yield 7%.
a. What is the present value and duration of your
obligation? (Do not round intermediate calculations. Round
"Present value" to 2 decimal places and "Duration" to 4 decimal
places.)
Present value:|__________________|
Duration: |__________________|years
b. What is the duration of a zero-coupon bond that
would immunize your obligation and its future redemption value?
(Do not round intermediate calculations. Round...
You will be paying $9,400 a year in tuition expenses at the end of the next...
You will be paying $9,400 a year in tuition expenses at the end
of the next 2 years. Bonds currently yield 7%.
a.
What is the present value and duration of your obligation?
(Do not round intermediate calculations. Round "Present
value" to 2 decimal places and "Duration" to 4 decimal places. Omit
the "$" sign in your response.)
Present value
$
Duration
years
b.
What maturity zero-coupon bond would immunize your obligation?
(Do not round intermediate calculations....
You will be paying $9,000 a year in tuition expenses at the end of the next...
You will be paying $9,000 a year in tuition expenses at the end
of the next 3 years. Bonds currently yield 16%.
a What is the present value of your obligation ?
__________________
b What is the duration of your obligation ?
______________________
c Suppose you wish to fund your obligation using 1-year
zero-coupon bonds and perpetuity bonds. How much of 1-year zero
__________________________ and how much of perpetuity bonds
____________________ (in market value ) will you want to hold...
You will be paying $11,500 a year in tuition expenses at the end of the next...
You will be paying $11,500 a year in tuition expenses at the end
of the next two years. Bonds currently yield 10%.
a. What is the present value and duration of your obligation?
(Do not round intermediate calculations. Round "Present value" to 2
decimal places and "Duration" to 4 decimal places.)
b. What maturity zero-coupon bond would
immunize your obligation? (Do not round intermediate
calculations. Round "Duration" to 4 decimal places and "Face value"
to 2 decimal places.)
b1,Duration?
b2....
You will be paying $9,200 a year in tuition expenses at the end of the next...
You will be paying $9,200 a year in tuition expenses at the end
of the next two years. Bonds currently yield 6%.
a. What is the present value and duration of
your obligation? (Do not round intermediate calculations.
Round "Present value" to 2 decimal places and "Duration" to 4
decimal places.)
present value ? duration?
b. What maturity zero-coupon bond would
immunize your obligation? (Do not round intermediate
calculations. Round "Duration" to 4 decimal places and "Face value"
to 2...
You will be paying $9,500 a year in tuition expenses at the end of the next...
You will be paying $9,500 a year in tuition expenses at the end
of the next two years. Bonds currently yield 8%.
a. What is the present value and duration of your
obligation?
b. What maturity zero-coupon bond would
immunize your obligation?
c. Suppose you buy a zero-coupon bond with
value and duration equal to your obligation. Now suppose that rates
immediately increase to 9%. What happens to your net position, that
is, to the difference between the value of...
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