Question
In: Finance
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 tables!! Thank you! I will thumb up if it's correct!
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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?
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...
Angela loans Kathy $8,000. Kathy repays the loan by paying $5,000 at the end of one and a half years and $5,000 at the end of three years.
Angela loans Kathy $8,000. Kathy repays the loan by paying
$5,000 at the end of one and a half years and $5,000 at the end of
three years. The money received at t = is immediately
reinvested at an annual effective interest rate of 5%. Find Kathy's
annual effective rate of interest and Angela's annual yield. (Round
your answers to two decimal places.)Kathy's annual effective rate of interest = ________ %Angela's annual yield = ___________%
You deposit $3,000, $4,000, and $5,000 respectively at the end of years 1, 2, and 3...
You deposit $3,000, $4,000, and $5,000 respectively at the end
of years 1, 2, and 3 from today in an account that offers 15%
interest. How much your savings will be worth in three years?
Instead of three annual instalments, what single amount deposited
today will get you to the same target. (5 + 5)
If you deposit $5,000 at the end of each of the next 20 years into an...
If you deposit $5,000 at the end of each of the next 20 years
into an account paying 10.8 percent interest, how much money will
you have in the account in 20 years? How much will you have if you
make deposits for 40 years? Show Work.
14) a. Shelby Co. has common stock of $2,000 and retained earnings of $5,000 at the...
14)
a. Shelby Co. has common stock of $2,000 and retained earnings
of $5,000 at the beginning of the year. During the year, the
company earned revenues of $10,000 on account; incurred operating
expenses of $6,500; collected $8,000 of accounts receivable;
borrowed $20,000 from a bank; obtained $8,000 of cash from owners
for stock and paid $4,500 of cash to the owners as dividends. How
much is the ending balances of common stock and retained earnings
___________ and _______________ ....
4. Determine the value at the end of four years of a $5,000 investment today that...
4. Determine the value at the end of four years of a $5,000
investment today that pays a nominal annual interest rate of 15%,
compounded:
a)Annually
b)Semiannually
c)Quarterly
d)Monthly
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