(A) Adequate information: Tuition fee obligation-$10000 Interest rate- 8% To calculate: The present value of obligation and duration of obligation Introduction: The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Question

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Answer 1

Question

Chapter 16, Problem 12PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

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Students have asked these similar questions

Professor Brown has just retired after 25 years with Jessup University. Her total pension funds have an accumulated value of $504,000, and her life expectancy is 25 more years. Her pension fund manager assumes he can earn a 9 percent return on her assets. What will be her yearly annuity for the next 25 years?

Caroline Moore has a contract in which she will receive the following payments for the next four years: $10,000, $11,000, $9,000, and $8,000. She will then receive an annuity of $13,000 a year from the end of the 4th through the end of the 10th year. The appropriate discount rate is 11 percent. What is the percent value of all future payments?

Nick Weber wants to have $120,000 at the end of 10 years, and his only investment outlet is an 8 percent long-term certicate of deposit (compounded annually). With the certificate of deposit, he made an initial investment at the beginning of the year year. How much does Nick need to deposit to get the $120,000 at the end of 10 years. a. What amount could Nick pay at the end of each year annually for 10 years to achieve this same objective?

Answer 2

Question

Chapter 16, Problem 12PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 16, Problem 12PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 16, Problem 12PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 16, Problem 12PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Answer 6

Chapter 16, Problem 12PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Answer 7

Chapter 16, Problem 12PS

Summary Introduction

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Answer 8

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Answer 9

Summary Introduction

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

Answer 10

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Answer 11

Summary Introduction

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

Answer 12

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Answer 13

Summary Introduction

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

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Answer 17

Ch. 16 - Prob. 1PS Ch. 16 - Prob. 2PS Ch. 16 - Prob. 3PS Ch. 16 - Prob. 4PS Ch. 16 - Prob. 5PS Ch. 16 - Prob. 6PS Ch. 16 - Prob. 7PS Ch. 16 - Prob. 8PS Ch. 16 - Prob. 9PS Ch. 16 - Prob. 10PS

(A) Adequate information: Tuition fee obligation-$10000 Interest rate- 8% To calculate: The present value of obligation and duration of obligation Introduction: The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Solution Summary: The author explains the present value of obligation and duration of tuition fee obligation. The time period at which zero coupon bonds immunize is 1.49 years.

Videos

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Want to see the full answer?

Chapter 16 Solutions

(A) Adequate information: Tuition fee obligation-$10000 Interest rate- 8% To calculate: The present value of obligation and duration of obligation Introduction: The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

Solution Summary: The author explains the present value of obligation and duration of tuition fee obligation. The time period at which zero coupon bonds immunize is 1.49 years.

Videos

(A) Adequate information: Tuition fee obligation-$10000 Interest rate- 8% To calculate: The present value of obligation and duration of obligation Introduction: The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

(B) To calculate: The time period at which zero coupon bond will immunize the tuition fee obligation. Introduction: The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

(B) To calculate: The net position of Zero Coupon Bond when interest factor increases to 9% Introduction: The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

(D) To calculate: the net position if the rate decreases to 7% Introduction: The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond

Want to see the full answer?

Chapter 16 Solutions

(A)

Adequate information:

Tuition fee obligation-$10000
Interest rate- 8%

To calculate:

The present value of obligation and duration of obligation

Introduction:

The present value of obligation refers to the sum of all cash flow at a given interest rate received/paid after n years.

(B)

To calculate:

The time period at which zero coupon bond will immunize the tuition fee obligation.

Introduction:

The time to immunize zero Coupon bond is that which has the maturity matching with investor's time horizon.

(B)

To calculate:

The net position of Zero Coupon Bond when interest factor increases to 9%

Introduction:

The Net position refers to the difference between present value of tution fee obligation due to change in interest rate and present value of bond

(D)

To calculate:

the net position if the rate decreases to 7%

Introduction:

The Net position refers to the difference between present values of tuition fee obligation due to change in interest rate and present value of bond