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. 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.

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. 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.

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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Q3) Mr. Clifton Chen, aged 39, recently purchased an endowment plan from an insurer that requires him to set aside $25,000 per year for the next 23 years till he retires at age 62. The first premium payment occurs at the beginning of the period. Assuming an inflation rate of 2% and an estimated rate of return of 3.2% from the endowment plan, what is the estimated future value of Clifton’s regular savings at age 62?
Gary is planning for his retirement this year. One option that has been presented to him is the purchase of an annuity that would provide a $31, 000 payment each year for the next 18 years. Factor Table Appendix 9.1 Present value of $1 received in n periods = 0.1799 Appendix 9.2 Present value of an annuity of $1 per period= 8.2014 Calculate how much Gary should be willing to pay for the annuity if he can invest his funds at 10% ( For calculation purposes, use 4 decimal places as displayed in the factor table provided and round the final answer to 0 decimal places, e.g. 58,971)
Pls correct solution with steps.
Assume that you contribute $150 per month to a retirement plan for 20 years. Then you can increase the contribution to $258 per month for another 20 years, and finally, $408 per month for the last 10 years. Given a 7 percent interest rate, what is the value of your retirement plan after the 50 years?
A borrower can obtain an 80 percent loan with an 9 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 95 percent loan at an 9.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. Required: a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 95 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the incremental cost of borrowing the additional funds if the borrower planned to own the years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Incremental…
You have purchased a guaranteed investment contract (GIC) from an insurance firm that promises to pay you a 5% compound rate of return per year for 6 years. If you pay $20,000 for the GIC today and receive no interest along the way, you will get __________ in 6 years (to the nearest dollar). (Round your answer to the nearest whole dollar).
A trust notifies you that you are entitled a grant that would give you annual payments of $6,200 per year in perpetuity. The first payment will be made to you three years later (at the end of year 3). The annual interest rate is 10% (APR). What is the present value of the grant? A. 56,363.64 B. 46,581.52 C. 51,239.67 D. 62,000.00
A new investment opportunity for you is an annuity that pays $560 at the beginning of each year for 3 years. You could earn 5.4% on your money in other investments with equal risk. What is the most you should pay for the annuity? Group of answer choices $1,595.40 $1,756.86 $1,517.12 $1,442.76 $1,696.61
An individual has determined utilizing the annuity method of capital needs analysis that he needs $1,045,656 at the beginning of his retirement to meet his retirement life expectancy goals. If this individual would like to be more conservative in his retirement planning forecast and maintain this capital balance throughout his retirement life expectancy of 32 years, given an expected earnings rate of 6%, and an inflation rate of 3% during the period, how much more would he need to have at the beginning of his retirement?
You have a chance to buy an annuity that pays $5,700 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should Dav for the annuity? a $15,378.22 b. $16,454.70 c. $11,687.45 d. $14,763.09 e. $13.532.83
You deposit $11,700 annually into a life insurance fund for the next 10 years, at which time you plan to retire. Instead of a lump sum, you wish to receive annuities for the next 20 years. What is the annual payment you expect to receive beginning in year 11 if you assume an interest rate of 7 percent for the whole time period? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Annuities per year over the next twenty years Help
1) What is the loanable funds market? 2) Calculate the following: You save $100 and want to see how much you will earn based on the following interest rates Interest Rate Value after 1 month -1% ? 0.5% ? 1% ? 2% ? 3) What supply factors affect the Loanable Funds market? 4) What demand factors affect the Loanable Funds market?

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