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 954,278 5,509,878 102.32 59,113,600 109,630,000 Bond B 94.9 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?

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 954,278 5,509,878 102.32 59,113,600 109,630,000 Bond B 94.9 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?

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

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The value in pounds of a fund at time t = 0 is V0 = 50, 000. After one year (at t = 1) it has increased to V1 = 51, 500 and at that time £1, 500 is withdrawn. After two years (at t = 2) the fund is worth V2 = 50, 800. (a) Compute the time-weighted rate of return. (b) If the fund is liquidated after two years what is the yield that has been achieved?
You have invested P100,000 in a mutual fund that promises to pay 8% each year. You will keep this for 10 years and then cash out the total value. The cost to close the mutual fund account by then is expected to be P5,000. If your minimum return from this investment is 7%, compute for your cost of illiquity with regard to the investment.
Suppose that a life insurance company has guaranteed a payment of $14 million to a pension fund 4.5 years fromfund and can invest the entire premium for 4.5 years at an annual interest rate of 6.25%, how much will the life in$13.7 million$17.8 million$18.4 million$14.1 million
You need to choose between making a public offering and arranging a private placement. In each case, the issue involves $10 million face value of 10-year debt. You have the following data for each: • A public issue. The interest rate on the debt would be 8.5%, and the debt would be issued at face value. The underwriting spread would be 1.5%, and other expenses would be $80,000. A private placement. The interest rate on the private placement would be 9% , but the total issuing expenses would be only $30,000 a-1. Calculate the net proceeds from public issue. Note: Enter your answer in dollars not millions of dollars. a-2. Calculate the net proceeds from private placement. Note: Enter your answer in dollars not millions of dollars. b-1. Calculate the Present Value of the extra interest on the private placement. Note: Do not round intermediate calculations. Enter your answer in dollars not millions of dollars. Round your answer to the nearest whole dollar amount. b-2. Other things being…
You pay $21,600 to the Laramie Fund, which has an NAV of $18 per share at the beginning of the year. The fund deducted a front-end load of 4% at the time of the purchase. The securities in the fund then increased in value by 10% during the year. The fund's expense ratio is 1.3% and is deducted from year-end asset values. What is your rate of return on the fund if you sell your shares at the end of the year? Select the answer closest to the correct return. (Hint: The formula on slide #23 in the "Mutual Funds, ETFs, ..." slide set solves for the gross return. Your rate of return would be the gross return minus 1. The formula on slide # 23 can be written as X(1-f)(1+r-a)" (1-b) Gross Return = (1 - f)(1+r-a)" (1-b) or as Gross Return = X where X is the dollar amount invested. The other variables in the formula (f, r, a, n, b) are all defined in the slide set and in the lecture.) 4.2% 10% 8.7% O 4.7%
An investor pays P1,100,000 for a mine which will yield a net income of P200,000 at the end of each year for 10 years and then will become useless. He accumulates a replacement fund to recover his capital by annual investments at 4.5%. At what rate (%) does he receive interest on his investment at the end of each year?
(a) Cheyenne Inc. has $470,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $70,044 at the end of each year for 10 years, and the other is to receive a single lump-sum payment of $1,459,750 at the end of the 10 years. Which alternative should Cheyenne select? Assume the interest rate is constant over the entire investment. eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer
please i need help
Your client invests $2 million in a security that matures in 4 years and pays 7.5 percent annual interest rate compounded annually. Assuming no interim cash flows, which of the following will most likely be the value of the investment at maturity? $2.150 million. $2.600 million. $2.671 million.
The American Pharmaceutical Company (APC) has a policy that all capital investments must have a five- year or less discounted payback period in order to be considered for funding. The MARR at APC is 8% per year. Is the above project able to meet this benchmark for funding? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 8 ber year. \table[[, ], [End of Year,Cash Flow ], [0,-$285,000 K The American Pharmaceutical Company (APC) has a policy that all capital investments must have a five-year or less discounted payback period in order to be considered for funding. The MARR at APC is 8% per year. Is the above project able to meet this benchmark for funding? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 8per year. …. The payback period is years. (Round to the nearest whole number.) End of Year 8123456 0 6-11 Cash Flow -$285,000 - $30,000 $65,000 $160,000 $230,000 $335,000 $95,000

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