Question
In: Accounting
A company has liabilities of $1800 and $2150 due at the end of years 1 and...
A company has liabilities of $1800 and $2150 due at the end of years 1 and 2 respectively. The only investments available are 1-year 5% annual coupon bonds and 2-year 6% annual coupon bonds and both redeemable at par and with an effective yield of 3%.
What is the total cost to the company in order to exactly (absolutely) match the assets and liabilities at a 3% annual effective rate?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
A company has liabilities of $2,000 and $5,000 due at the end of years 1 and...
A company has liabilities of $2,000 and $5,000 due at the end of
years 1 and 3 respectively. The company can purchase a 1-year
$1,000 par value zero-coupon bond with an annual effective yield of
5.6% and a 3-year $1000 par value zero-coupon bond. If the cost of
exactly matching the liabilities is $6,068.36, what is the
effective yield on the 3-year bond?
Show all works, and please show ur work it with math steps and
illustrations instead of excel...
Company ABC has liabilities of 20,000, 50,000, and 70,000 due at the end of years 1,...
Company ABC has liabilities of 20,000, 50,000, and 70,000 due at
the end of years 1, 2, and 3 respectively. The company would like
to exactly match these liabilities using the following assets:
A one-year zero coupon bond with a yield of 4%
A two-year zero coupon bond with a yield of 5%
A three-year coupon bond with annual coupons of 6% and a yield
of 5.5%
What is the total cost of the asset portfolio that will match
the...
A company has liabilities of $10,000 due in 1 year and $20,000 due in 2 years....
A company has liabilities of $10,000 due in 1 year and $20,000
due in 2 years. The company would like to cash flow match these
liabilities with a combination of the following assets: a 2-year
bond with annual coupons of 5% yielding 4% a 1-year bond with
annual coupons of 6% yielding 3% What is the par value of the
1-year bond that should be purchased to cash flow match this
portfolio? 8,300 8,500 8,800 9,000 9,400
A company has liabilities of $10,000 due in 1 year and $20,000 due in 2 years....
A company has liabilities of $10,000 due in 1 year and $20,000
due in 2 years. The company would like to cash flow match these
liabilities with a combination of the following assets:
a 2-year bond with annual coupons of 5% yielding 4%
a 1-year bond with annual coupons of 6% yielding 3%
What is the IRR on the asset portfolio created?
3.00%
3.20%
3.40%
3.60%
3.80%
Suppose that a company has a series of liabilities with the due dates as follows:: In...
Suppose that a company has a series of liabilities with the due
dates as follows:: In 6 months: $2,000,000, In 1 year: $2,200,000,
In 1.5 years: $2,500,000, In 2 years: $3,200,000, In 2.5 years:
$3,700,000, In 3 years: $4,300,000, In 3.5 years: $4,700,000, In 4
years: $5,100,000. The company is considering investing in four
different bonds: (1) a 1-year Treasury Bill with a face value of
$1,000 and no coupon, (2) a 2-year Treasury note with a face value
of...
Jaime owes Eddie $12,000 at the end of 3 years and $18,000 due at the end of...
Jaime owes Eddie $12,000 at the end of 3 years and $18,000
due at the end of 7 years with accumulated interest from
today at 10% compounded quarterly. Jaime decided to settle his
obligations by making a payment of $8,000 at the end of year 1,
$5,000 at the end of year 5 and another payment at the end of year
9. if they agree that money is worth 14% compounded semi-annually,
find the size of the payment at the end...
1.Find the present value at time 0 of $15086 due at the end of 4.88 years...
1.Find the present value at time 0 of $15086 due at the end of
4.88 years if the force of interest δ=0.023δ=0.023.
2.If an investment will double in 8.15 years at a constant force
of interest δ, then
3.An investment of $1300 at t = 0 accumulates at a constant
force of interest δδ= 4% for the first 4 years and at a nominal
annual rate of interest of 5% compounded semiannually thereafter.
Find the accumulated value of this investment...
Find the present value of $10,000 due at the end of 7 years if: (a) The...
Find the present value of $10,000 due at the end of 7
years if:
(a) The nominal annual interest rate is 6% compounded semi
annually.
(b) The nominal annual interest rate is 4% compounded monthly.
Info 1. Current YTM = 8.5% 2. Liabilities at the end of 5 years = 10,000(1.085)^5...
Info
1. Current YTM = 8.5%
2. Liabilities at the end of 5 years = 10,000(1.085)^5 =
15,036.56
3. Buy the bond that has a coupon of 8%, YTM 8.5%, N = 5
Calculate -
1. Duration
2. Can you match duration of your liabilities?
3. Calculate what happens if your YTM rises by 1%
***please only answer question 2 [Can you match duration of your
liabilities?]. i will post 3 after i get the answer for 2. i
included...
The accountant of Skywalker Corp. (this is a public company) reviewed the draft of the 2150...
The accountant of Skywalker Corp. (this is a public company)
reviewed the draft of the 2150 year end financial statements and
had found that it was missing essential information to find the
correct calculations of Basic EPS and Diluted EPS.
On January 1, 2150, Skywalker Corp. started the year with
20,000,000 common shares outstanding.
On February 28, issued 3,000,000 common shares.
On April 31, Skywalker Corp. bought back and retired 5,000,000
common shares.
On December 1, Skywalker Corp. issued a...
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