A company is required to pay 50, 000(1.075)y in y years. The company invests 30, 000 in a 28−year zero-coupon bond and 20, 000 in a 35−year zero-coupon bond to Redington immunize its position against small changes in interest rates, based on an annual effective interest rate of 7.5%. Calculate y showing your work.

A company is required to pay 50, 000(1.075)y in y years. The company invests 30, 000 in a 28−year zero-coupon bond and 20, 000 in a 35−year zero-coupon bond to Redington immunize its position against small changes in interest rates, based on an annual effective interest rate of 7.5%. Calculate y showing your work.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

See similar textbooks

Similar questions

A $1,000 face value bond issued by the Purdue Company currently pays total annual interest of $80 per year and has a 15-year life. a-What is the present value, or worth, of this bond if investors are willing to accept a 10 percent annual rate of return on bonds of similar quality bond? b. How would your answer change is the bond makes semi-annual payments? c-How would your answer in (a) change if, one year from now, investors only required a 6 percent annual rate of return on bond investments similar in quality to the Purdue bond? d-Suppose the original bond can be purchased for $925. What is the bond’s yield to maturity?
What is the amount of a single interest payment that Orion Technologies will make on these financial accounting question?
Please provide right answer
What would you pay for a $205,000 debenture bond that matures in 15 years and pays $10,250 a year in interest if you wanted to earn a yield of 2%? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
. a) You take a loan of 10lacs taka from NRB Bank with a repayment agreement of 1356100 tk after 3.5 years. Compute the yield to maturity of that loan. b) If ABC Corporation’s bond price is 400000tk and pays its bond holders 12500tk annually forever, what will be the yield to maturity of that bond? c) If Pitter lends BDT380000 to her father and next year he wants BDT440000 back , what is the yield to maturity on this loan? Show detailed calculation and formula where necessary.
Help me expert of financial accounting
Dixie Bank offers a certificate of deposit with an option to select your own investment period. Jonathan has $8,000 for his CD investment. If the bank is offering a 5.5% interest rate, compounded annually, how much will the CD be worth at maturity if Jonathan picks a a. three-year investment period? b. six-year investment period? c. eight-year investment period? d. twenty-year investment period? a. How much will the $8,000 CD investment at 5.5% interest rate be worth at maturity if Jonathan picks a 3-year investment period? $nothing (Round to the nearest cent.)
A bank holds a 10-year $2 million face value bond with a duration of 8 years. The current price = $950,000. Interest rates are expected to increase from 9% to 11% over next 3 months. Demonstrate how the bank can use a forward contract to hedge the interest rate risk.
You issued debt in the form of bonds, with a face value of $1,000, and have 9 years until maturity. The bonds have an annual coupon rate of 7.8%, which are paid semiannually. a. The current price is $1,100. What is the pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g 12.34.) b. The tax rate is 22%. What is the aftertax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.)
A $1,000 face value bond issued by the Purud Company currently pays total annual interest of $80 per year and has a 13-year life. a-What is the present value, or worth, of this bond if investors are willing to accept a 10 percent annual rate of return on bonds of similar quality if the bond is a Eurobond? b-How would your answer in (a) change if the bond is a U.S. bond? c-How would your answer in (b) change if, one year from now, investors only required a 6 percent annual rate of return on bond investments similar in quality to the Purud bond? d-Suppose the original bond can be purchased for $925. What is the bond's yield to maturity?
An investor is considering buying a 20-year corporate bond. The bond has a face value of $1000 and pays 4% interest per year in two semiannual payments. To receive 6% interest, compounded semiannually, how much should be paid for the bond?
Compute the specified quantity. A 7 year bond costs $30,000 and will pay a total of $2,000 in interest over its lifetime. What is its annual interest rate r (as a percent)? (Round your answer to three decimal places.) r =