Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN: 9781337395250
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 11, Problem 2P
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An insurance company has liabilities of £7 million due in 10 years' time and
£9 million due in 17 years' time.
The assets of the company consist of two zero-coupon bonds, one paying
£X million in 7 years' time and the other paying £Y million in 20 years' time.
The current interest rate is 6% per annum effective.
Find the nominal value of X (i.e. the amount, IN MILLIONS, that bond X pays
in 7 year's time) such that the first two conditions for Redington's theory of
immunisation are satisfied.
Express your answer to THREE DECIMAL PLACES.
An individual is investing in a market where spot rates and forward rates
apply.
In this market, if at time t=0 he agrees to invest £5.3 for two years, he will
receive £7.4 at time t=2 years. Alternatively, if at time t=0 he agrees to invest
£5.3 at time t=1 for either one year or two years, he will receive £7.5 or £7.3
at times t=2 and t=3, respectively.
Calculate the price per £5,000 nominal that the individual should pay for a
fixed-interest bond bearing annual interest of 6.6% and is redeemable after 3
years at 110%. State your answer at 2 decimal places.
The one-year forward rates of interest, f+, are given by:
.
fo
= 5.06%,
f₁ = 6.38%, and
f2
= 5.73%.
Calculate, to 4 decimal places (in percentages), the three-year par yield.
Chapter 11 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 11 - How are project classifications used in the...Ch. 11 - Prob. 2QCh. 11 - Why is the NFV of a relatively long-term project...Ch. 11 - Prob. 4QCh. 11 - If two mutually exclusive projects were being...Ch. 11 - Discuss the following statement: If a firm has...Ch. 11 - Why might it be rational for a small firm that...Ch. 11 - Project X is very risky and has an NPV of 3...Ch. 11 - Prob. 9QCh. 11 - A firm has a 100 million capital budget. It is...
Ch. 11 - NPV Project L costs 65,000, its expected cash...Ch. 11 - IRR Refer to problem 11-1. What is the projects...Ch. 11 - MIRR Refer to problem 11-1. What is the projects...Ch. 11 - Prob. 4PCh. 11 - DISCOUNTED PAYBACK Refer to problem 11-1. What is...Ch. 11 - NPV Your division is considering two projects with...Ch. 11 - CAPITAL BUDGETING CRITERIA A firm with a 14% WACC...Ch. 11 - Prob. 8PCh. 11 - CAPITAL BUDGETING CRITERIA: ETHICAL CONSIDERATIONS...Ch. 11 - CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE...Ch. 11 - CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE...Ch. 11 - Prob. 12PCh. 11 - MIRR A firm is considering two mutually exclusive...Ch. 11 - CHOOSING MANDATORY PROJECTS ON THE BASIS OF LEAST...Ch. 11 - NPV PROFILES: TIMING DIFFERENCES An oil-drilling...Ch. 11 - Prob. 16PCh. 11 - CAPITAL BUDGETING CRITERIA A company has an 11%...Ch. 11 - NPV AND IRR A store has 5 years remaining on its...Ch. 11 - Prob. 19PCh. 11 - NPV A project has annual cash flows of 5,000 for...Ch. 11 - Prob. 21PCh. 11 - MIRR A project has the following cash flows: This...Ch. 11 - CAPITAL BUDGETING CRITERIA Your division is...Ch. 11 - BASICS OF CAPITAL BUDGETING You recently went to...
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