A portfolio of assets consists of the following as of January 1, 1997: 1) an annuity - immediate with 20 annual paymentsof 2,000 each, with the first payment on December 31, 2007 2) a 10,000 zero - coupon bond maturing on December31, 2001 at an annual effective interest rate of 8% Calculate the modified duration of the portfolio as of January 1, 1997.A) 10.67 B) 11.11 C) 11.53 D) 11.98 E) 12.41

Here's how to calculate the modified duration of the portfolio:1. Calculate the Modified Duration of…

Answered: A portfolio of assets consists of the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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On May 1, 2020, a $300,000, ten-year, 14% bond was sold to yield 12% plus accrued interest. The bond was dated January 1, 2020, and interest is paid each January 1 and July 1. Present value data follow: PV of $1 PV of an Annuity of $1 10 periods 20 periods 10 periods 20 periods 6% 0.558395 0.311805 7.360087 11.469921 7% 0.508349 0.258419 7.023582 10.594014 12% 0.321973 0.103667 5.650223 7.469444 14% 0.321973 0.072762 5.216116 6.623131 Required: a. Compute the amount of cash received from the sale of the bond. b. Prepare the journal entry to record the sale. c. Why is the amount of cash received from issuing the bond not equal to the face amount of the bond?
A 12% Pl face value bond with interest payable June 30 and December 31, which matures on June 30, 2026, was purchased at 95 for short term investment purposes on June 30, 2021. At the end of December 31, 2021 , the bonds were quoted at 110. By June 30, 2022, all the bonds were sold at 115. How much would be the total cash that would be received by June 30, 2022? a.1,000,000 b.1,100,000 c.1,150,000 d.1,210,000
Consider the following portfolio of assets and liabilities. The time, t, is measured in years. Assets: A payment of £909.09 t = 1 and a payment of £1,100 at t = 3. Liabilities: A payment of £2,000 at t = 2. The interest rate is 10% p.a. Calculate the present value of the Assets: £ Liabilities: £ Enter an answer correct to 2 decimal places Calculate the effective duration of the Assets: Liabilities: Enter an answer correct to 2 decimal places Calculate the convexity of the Assets: Liabilities: Enter an answer correct to 2 decimal places Does the portfolio of assets and liabilities satisfy the conditions for Redington's immunisation? Yes Ο Νο
Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): The timeline starts at Period 0 and ends at Period 20. The timeline shows a cash flow of $ 20.72 each from Period 1 to Period 19. In Period 20, the cash flow is $ 20.72 plus $ 1,000. Period0121920 Cash Flows$20.72$20.72$20.72$20.72+$1,000 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value?
ABC Inc. plans to issue $500,000 face value bonds with a stated interest rate of 12% and market interest rate of 10%. They will mature in 10 years. Interest will be paid semiannually. At the date of issuance, compute the present value (bond issue price) of the future cash flows. Following are appropriate factors from tables: Table % / n Present Value of $1 Present Value of ordinary annuity of $1 10%/10 .38554 6.14457 12%/10 .32197 5.65022 5%/20 .37689 12.46221 6%/20 .31180 11.46992 Required Computation:
David Palmer identified the following bonds for investment: BondA: A$1millionpar,10%annualcouponbond,whichwillmature on July 1, 2025. Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. Bond C: A $1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. The three bonds were issued on July 1, 2011. (a) If Bond B is issued at face value and both Bond B and Bond A are having the same yield to maturity (EAR), calculate the market price of Bond A on July 1, 2011. [N ote: Full mark would only be given to correct answer of which the values of those variables not provided in the question directly are derived.] (b） David purchased the Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on January 1, 2016…
On January 1, 2021, LMN Company issued 10-year bonds with a face amount of P3,000,000 at a stated interest rate of 8% payable annually on January 1. The bonds were priced to yield 10%. Present value factors are as follows: Present value of P1 for 10 periods Present value of an ordinary annuity of P1 for 10 periods At 8%. 0.46326.7101 At 10%0.38556.1446 The total issue price of the bonds was:
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A $10,000 bond with a coupon rate of 5% was redeemable on July 1, 2028. It was purchased on September 10, 2015 when the yield rate was 6% compounded semi- annually. Determine the purchase price of the bond. Paragraph IU ... Purchase Date: Redemption Date: 取 A
A $500,000, ten year, 7% bond issue was sold to yield 6% interest payable annually. Actuarial information for 10 periods is as follows: present value $1 @ 7% = 0.50835 @ 6% = 0.55839 present value of an annuity of $1 @ 7% = 7.02359 @ 6% = 7.36009 The discount or premium at the date of bond issuance would be: A $500,000, ten year, 7% bond issue was sold to yield 6% interest payable annually. Actuarial information for 10 periods is as follows: present value $1 @ 7% = 0.50835 @ 6% = 0.55839 present value of an annuity of $1 @ 7% = 7.02359 @ 6% = 7.36009 The discount or premium at the date of bond issuance would be: A: $36,798 premium B: $10,097 discount C: $11,778 D:$35,117 discount
Consider the following portfolio of assets and liabilities. The time, t, is measured in years. Assets: A payment of £3,738.32 t = 3 and a payment of £4,280 at t = 5. Liabilities: A payment of £8,000 at t = 4. The interest rate is 7 % p.a. Calculate the present value of the Assets: £ 数字 Liabilities: £ Enter an answer correct to 2 decimal places Calculate the effective duration of the Assets: 数字 Liabilities: 数字 Enter an answer correct to 2 decimal places Calculate the convexity of the Assets: 数字 Liabilities: 数字 Enter an answer correct to 2 decimal places Does the portfolio of assets and liabilities satisfy the conditions for Redington's immunisation? Yes ○ No
Scottie Adams Bird Supplies issued 10% bonds, dated January 1, with a face amount of $190,000 on January 1, 2021. The bonds mature in 2031 (10 years). For bonds of similar risk and maturity the market yield is 8%. Interest is paid semiannually on June 30 and December 31. What is the price of the bonds at January 1, 2021? Some relevant and irrelevant present value factors: * PV of annuity due of $1: n = 20; i = 4% is 14.13394 * PV of ordinary annuity of $1: n = 20; i = 4% is 13.59033 **PV of $1: n = 20; i = 4% is 0.45639 Multiple Choice $215,822. $148,253. $228,112. $344,930.

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