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. Face Value

C.

c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 12%. 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. Input the amount as a positive value. Round your answer to 2 decimal places.)

Net position _____? in value by _____?

Please answer fully!

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

ou will be paying $11,500 a year in tuition expenses at the end of the next...

ou 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.) c. Suppose...

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 $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...

Question

You will be paying $11,500 a year in tuition expenses at the end of the next...

Solutions

Expert Solution

Related Solutions

ou will be paying $11,500 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...

You will be paying $11,400 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...

You will be paying $12,800 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...

You will be paying $9,400 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...

You will be paying $9,200 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...