Homework Help is Here – Start Your Trial Now!
Business
Accounting
13 Cash flow I consists of three payments: A in 5 periods, B in 10 periods and C in 15 periods. Cash flow 2 consists of 2 payments X in 6 periods and Y in 12 periods. As of now, at yield j per period for all maturities, the two sets of cashflows have the same present value and the same Macaulay duration. Suppose that one period from now the yield is still j for all maturities. Show that (a) the two sets of cash flows will have the same present value;

13 Cash flow I consists of three payments: A in 5 periods, B in 10 periods and C in 15 periods. Cash flow 2 consists of 2 payments X in 6 periods and Y in 12 periods. As of now, at yield j per period for all maturities, the two sets of cashflows have the same present value and the same Macaulay duration. Suppose that one period from now the yield is still j for all maturities. Show that (a) the two sets of cash flows will have the same present value;

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question
*7.2.13 Cash flow 1 consists of three payments: A in 5 periods, B in 10 periods and C in 15 periods. Cash flow 2 consists of 2 payments: X in 6 periods and Y in 12 periods. As of now, at yield j per period for all maturities, the two sets of cashflows have the same present value and the same Macaulay duration. Suppose that one period from now the yield is still j for all maturities. Show that (a) the two sets of cash flows will have the same present value; (b) the two sets of cash flows have the same Macaulay duration at that time; and (c) the Macaulay duration one period from now is exactly 1 less than it is now.
Transcribed Image Text:*7.2.13 Cash flow 1 consists of three payments: A in 5 periods, B in 10 periods and C in 15 periods. Cash flow 2 consists of 2 payments: X in 6 periods and Y in 12 periods. As of now, at yield j per period for all maturities, the two sets of cashflows have the same present value and the same Macaulay duration. Suppose that one period from now the yield is still j for all maturities. Show that (a) the two sets of cash flows will have the same present value; (b) the two sets of cash flows have the same Macaulay duration at that time; and (c) the Macaulay duration one period from now is exactly 1 less than it is now.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS