The treasurer of a large corporation wants to invest $12 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 6.28 percent; that is, the EAR for this investment is 6.28 percent. However, the treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has already bought. If the term of the instrument is 120 days, what are the bond equivalent and discount yields on this investment? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places. Answer is complete but not entirely correct. Bond equivalent yield Discount yield 6.180 % 0.065 %

The treasurer of a large corporation wants to invest $12 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 6.28 percent; that is, the EAR for this investment is 6.28 percent. However, the treasurer wants to know the money market yield on this instrument to make it comparable to the T-bills and CDs she has already bought. If the term of the instrument is 120 days, what are the bond equivalent and discount yields on this investment? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places. Answer is complete but not entirely correct. Bond equivalent yield Discount yield 6.180 % 0.065 %

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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You are thinking about investing $5,022 in your friend's landscaping business. Even though you know the investment is Krisky and you can't be sure, you expect your investment to be worth $5,615 next year. You notice that the rate for one-year Treasury bills is 1%. However, you feel that other investments of equal risk to your friend's landscape business offer an expected return of 10% for the year. What should you do? The present value of the return is $ View an example Get more help. % 5 - A (Round to the nearest cent.) MacBook Pro & F 7 Clear all ( 20 Check answer ABLE 0 9 X 8 1000002E
The management of the Keribels Company wishes to apply the Miller-Orr model to manage its cash investments. They have determined that the cost of either investing in or selling marketable securities is P 100. By looking at the Keribels Company's past cash needs, they have determined that the variance of daily cash flow is P 75,000. Keribels Company's opportunity cost of cash per day is 0.05%. Based on their experience the cash balance should not fall below P 50,000. WHAT IS THE LOWER LIMIT? (Use a number, no decimal value, no currency, no space, no commas)
3. 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
. No. 1. Abbott Private Limited wants to purchase an equipment worth $2650,000. However, the firm is in short of funds and thus would be looking to borrow the amount from a bank. The bank manager has offered two different types of loans i.e. 14.16% interest rate for 50 years with quarterly installments and 14% interest rate for 50 years with monthly installments. Being the finance manager of the company, you have been given a task to calculate the quarterly and monthly installment amounts as well as make a choice between both the loans i.e. which loan is to be opted and why?
A financial institution uses a loan base rate of 4.35% and sets the credit risk premium at 6.68%. The institution charges a 1.5% loan origination fee and imposes 3.22% compensating balances. The required reserves for this institution are 10%. Additionally suppose your institution specifies the following linear probability model to estimate the probability of default: PD=80-8₁ Wealth - B₂Credit Score + B3 Number of Bankruptcies Bo= 10, 109.5 8₁0.10 B₂ = 0.20 B3 = 0.60 Use the information above to answer the question. What is the gross rate of return on the loan? O 9.31% O 11.03% O 12.53% 12.90%
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.
Smart Company is expecting temporary idle cash. Hence, it is considering investing in marketable securities. Assume that the fixed cost of selling marketable securities is P10 per transaction and the interest rate on marketable securities is 6% per year. The company estimates that it will make cash payments of P12,000,000 over a 1-month period. What is the average cash balance (rounded to the nearest peso)?
SHOW COMPLETE SOLUTIONS. DRAW CASH FLOW DIAGRAMS.
XYZ Corporation has a lower and an upper limit for its savings account at P40,000 and P70,000 respectively. Its optimal return point is P50,000. If as of the end of the day, XYZ has a cash balance of P13,000. How much should it request for additional funds or (invest in marketable securities)? Because its cash balance is less than the lower cash limit, XYZ should request for additional funds in the amount of:
Antonio Melton, the chief executive officer of Benson Corporation, has assembled his top advisers to evaluate an investment opportunity. The advisers expect the company to pay $404,000 cash at the beginning of the investment and the cash inflow for each of the following four years to be the following. Note that the annual cash inflows below are net of tax Year 1 $92,000 Year 2 $102,000 Year 3 $130,000 Year 4 $192,000 Mr. Melton agrees with his advisers that the company should use a desired rate of return of 12 percent to compute net present value to evaluate the viability of the proposed project. (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required a. Compute the net present value of the proposed project. Should Mr. Melton approve the project? A b.&c. Shawn Love, one of the advisers, is wary of the cash flow forecast and she points out that the advisers failed to consider that the depreciation on equipment used in this project will be tax…
A corporate customer obtains a $2 million loan from a bank. The annual spread between the interest rate of this loan and the bank’s cost of fund is 6%, and this bank charges an annual fee of 2.8%. The expected probability of default of this borrower is 9.6%, and the loss given default is 30.7%. Calculate the expected return on this loan based on Moody’s analytics portfolio manager model. Round your answer up to 4 decimal places in decimal term, i.e., enter 0.1234 instead of 12.34%.
D3) Finance Calculate the loan risk associated with a $4 million, five-year loan to a BBB-rated corporation in the computer parts industry that has a duration of 5.8 years. The cost of funds for the bank is 8 per cent. Based on four years of historical data, the bank has estimated the maximum change in the risk premium on the computer parts industry to be approximately 4.0 per cent. The current market rate for loans in this industry is 11 per cent.

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