A pension fund manager decides to invest a total of at most $40 million in U.S. Treasury bonds paying 4% annual interest and in mutual funds paying 6% annual interest. He plans to invest at least $5 million in bonds and at least $25 million in mutual funds. Bonds have an initial fee of $100 per million dollars, while the fee for mutual funds is $200 per million. The fund manager is allowed to spend no more than $7000 on fees. How much should be invested in each to maximize annual interest? What is the maximum annual interest? The amount that should be invested in Treasury bonds is $ million. mutual funds is $ million and the amount that should be invested in

A pension fund manager decides to invest a total of at most $40 million in U.S. Treasury bonds paying 4% annual interest and in mutual funds paying 6% annual interest. He plans to invest at least $5 million in bonds and at least $25 million in mutual funds. Bonds have an initial fee of $100 per million dollars, while the fee for mutual funds is $200 per million. The fund manager is allowed to spend no more than $7000 on fees. How much should be invested in each to maximize annual interest? What is the maximum annual interest? The amount that should be invested in Treasury bonds is $ million. mutual funds is $ million and the amount that should be invested in

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

A pension fund manager decides to invest a total of at most $35 million in U.S. Treasury bonds paying 3% annual interest and in mutual funds paying 5% annual interest. He plans to invest at least $ 5 million in bonds and at least $10 million in mutual funds. Bonds have an initial fee of $100 per million dollars, while the fee for mutual funds is $200 per million The fund manager is allowed to spend no more than $6000 on fees. How much should be invested in each to maximize annual interest? What is the maximum annual interest? The amount that should be invested in Treasury bonds is $_ million and the amount that should be invested in mutual funds is $_ million
A pension fund manager decides to invest a total of at most $30 million in US treausry bonds paying 6% annual intrest and in mutual funds paying 9% annual interest. He plants to invest at least $5 million in bonds and at least $15 million in mutual funds. Bobds have a initial fee of $100 per million dollars while the fee for mutual funds is $200 per million. the fund manager is allowed to spend no more than $5000 on fees. 1.How much should be invested in eacg ot maximise interest A-Amount to be invested in treasury bonds B-Amount that should be invested in mutual funds C-What is the maximum annual interrst
Please help me. Thankyou.
Answer all three question
Explain different types of money market instruments. In each of the below cases, which money market instruments would you recommend and why?a. A mutual fund manager has INR 450 million of cash, which he needs to park for a period of less than 180 days, where he will move this to equity.b. An oil refining company wishes to borrow INR 1500 million for a period of 90 days to fund its settlement of invoices.
Mutual funds charge their clients an “expense ratio” for managing yourfunds. A 1.5% annual expense ratio is common in the mutual fund industry.Suppose you invest $100,000 into a fund with a 1.5% expense ratio and leave it invested for 40 years. If you have a personal MARR of 6% per year, your future worth (less the expense ratio) will be $100,000 (1 – 0.015)(F/P, 6%, 40) = 1,013,141. If you invest instead in an exchange traded fund (ETF) that has an expense ratio of 0.1% per year, you will end up with F = $100,000 (1 – 0.001)(F/P, 6%, 40) = $1,027,541 which is $14,400 more than the mutual fund. Moral: Be mindful of expenses being levied on your savings vehicles (e.g., an individual retirement account) for retirement savings. How much will you have in 40 years if the expense ratio is 3.5% per year?
You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are (approximately) level perpetuities of $1 million per year. The interest rate is 10%. You plan to fully fund the obligation using 5-year maturity and 20-year maturity zero-coupon bonds. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? 4 million for 5 year bond and 6 million of 20-year bond. 6 million for 5 year bond and 4 million of 20-year bond. O 6.67 million for 5 year bond and 3.33 million of 20-year bond. O 3.33 million for 5 year bond and 6.67 million of 20-year bond. Question 9 Using the same information from question 8, suppose that one year has passed, and the interest rate remains at 10%. What actions are required to rebalance the portfolio? O buy additional 0.67 million 5-year bond and sell 0.67 million 20-year bond. Sell 0.67 million 5-year bond, purchase additional 0.67 million…
Suppose an individual invests £25,000 in a load mutual fund. The load fund entails an up-front commission charge of 4 percent of the amount invested and is deducted upfront. In addition, annual fund operating expenses are 0.85 percent, which is charged on the average net asset value invested in the fund. The return on this fund is 6 percent each year paid on the last day of the year. What would be the investor’s return on this fund after one year?
When Su Young-Ji went to withdraw $3,000 from the Nationwide Fidelity Mutual fund, he was informed that the fund would charge 4 percent of the amount withdrawn. What is the dollar amount of the withdrawal charge?
The pension fund of Glencore Group Pte Ltd has to make a lump sum payment of USD260,000,000 in four years. The pension team calculates the present value of the GIC to be USD 205,700,000. This is the amount they intend to invest today to immunize the lump sum payment. The pension fund is not permitted to use leverage and the current effective duration is 4. The pension fund is building a suitable portfolio and already holds the U.S. government bonds shown in Exhibit 1. Existing Portfolio Bonds Total Market Value Total Dollar Bond Market Price (USD) (USD) Duration Bond A 102.32 59,113,600 109,630,000 954,278 Bond B 94.9 5,509,878 The pension fund must choose a U.S. government bond to complete the immunized portfolio. Required: a) Why would a classical immunization strategy be suitable for the pension fund?
You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the funds are going to closely resemble perpetuities of $1 million per year. The interest rate is 9% per year. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds. How much market value of each of the zero coupon bonds will be necessary to fund the plan if you desire an immunized position? Duration of a perpetuity is (1+y)/y
A pensioner is expecting a lump sum of GHC 200,000 when she goes on pension next year and is thinking of the best way to allocate the funds to be received. An investment analyst has introduced her to a four funds as follows: Gamma Fund: This specializes in money market instruments and bonds of large corporations Delta Fund: This specializes in equities of exchange listed financial institutions Beta Fund: This specializes in bonds and equities of all good performing companies Index Fund: This is a portfolio that mimics the Ghana Stock Exchange All Share Index The investment analyst gathered information about the performance of the four funds and this is presented below: Funds Mean Return Standard Deviation Beta Co-efficient Gamma 15% 8% 0.25 Delta 20% 14% 1.20 Beta 18% 14% 0.85 Index 17% 12% 1.00 The rate on Government of Ghana five-year bond which is used as the standard risk-free rate is 8% per annum. The…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS