Mathematics For Machine Technology
8th Edition
ISBN: 9781337798310
Author: Peterson, John.
Publisher: Cengage Learning,
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Chapter 40, Problem 60A
Substitute the given numbers for letters in the following expressions and solve.
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Drapers' Bank offers loans and deposits with interest rate 5% compounded monthly.
(a)
If you deposit £5,000 in a Drapers' Bank account, how much money will be in your account 4 years from now? Enter your answer correct to the
nearest pound.
Answer:
(b) What is the effective interest rate of a Drapers' Bank account? Enter your answer as a percentage correct to 3 significant digits.
Answer:
(c)
Drapers' Bank gives you a loan of £60,000 to start a new company under the condition that you pay back the loan in monthly instalments of EC to
be paid at the end of each month over the next 5 years, starting at the end of this month. Determine the value of C and enter it correct to the nearest pound.
Answer:
The Mason group has a liability of £200,000 to be paid in 14 years' time. It wants to Redington immunise these liabilities with assets consisting of amount P in
a bank and Q 18-year zero coupon bonds, with P and Q to be determined. Interest is compounded monthly at rate 8%.
(a)
Answer:
What is the present value of the liability? Enter your answer correct to the nearest pound.
(b) What is the duration of the liability? Enter your answer correct to 3 significant digits.
Answer:
(c) What is the convexity of the liability? Enter your answer correct to 3 significant digits.
Answer:
(d)
Write down the two equations that P and Q need to satisfy for Redington immunisation to hold and solve these equations for P and Q. Enter the
answers correct to the nearest pound.
Answers: P=
Q=
(e) What is the convexity of the assets in this case? Enter your answer correct to 3 significant digits.
Answer:
(f)
Is the convexity condition that is necessary for Redington immunisation satisfied in this case?…
Chapter 40 Solutions
Mathematics For Machine Technology
Ch. 40 - Prob. 1ACh. 40 - Prob. 2ACh. 40 - Prob. 3ACh. 40 - Prob. 4ACh. 40 - Measure the length of the line segment in Figure...Ch. 40 - Prob. 6ACh. 40 - In Exercises 7 and 8, refer to the number scale in...Ch. 40 - In Exercises 7 and 8, refer to the number scale in...Ch. 40 - In Exercises 9 and 10, select the greater of the...Ch. 40 - In Exercises 9 and 10, select the greater of the...
Ch. 40 - List the following signed numbers in order of...Ch. 40 - Express each of the following pairs of signed...Ch. 40 - Note: For Exercises 13 through 62 that follow,...Ch. 40 - Note: For Exercises 13 through 62 that follow,...Ch. 40 - Note: For Exercises 13 through 62 that follow,...Ch. 40 - Note: For Exercises 13 through 62 that follow,...Ch. 40 - In Exercises 17 through 20, subtract the following...Ch. 40 - In Exercises 17 through 20, subtract the following...Ch. 40 - In Exercises 17 through 20, subtract the following...Ch. 40 - In Exercises 17 through 20, subtract the following...Ch. 40 - In Exercises 17 through 20, subtract the following...Ch. 40 - In Exercises 21 through 24, multiply the following...Ch. 40 - In Exercises 21 through 24, multiply the following...Ch. 40 - Prob. 24ACh. 40 - In Exercises 25 through 28, divide the following...Ch. 40 - In Exercises 25 through 28, divide the following...Ch. 40 - In Exercises 25 through 28, divide the following...Ch. 40 - In Exercises 25 through 28, divide the following...Ch. 40 - In Exercises 29 through 32, raise the following...Ch. 40 - Prob. 30ACh. 40 - In Exercises 29 through 32, raise the following...Ch. 40 - Prob. 32ACh. 40 - Prob. 33ACh. 40 - In Exercises 33 through 36, determine the...Ch. 40 - Prob. 35ACh. 40 - Prob. 36ACh. 40 - Prob. 37ACh. 40 - Prob. 38ACh. 40 - Prob. 39ACh. 40 - Solve each of the following problems using the...Ch. 40 - Prob. 41ACh. 40 - Prob. 42ACh. 40 - Solve each of the following problems using the...Ch. 40 - Solve each of the following problems using the...Ch. 40 - Prob. 45ACh. 40 - Solve each of the following problems using the...Ch. 40 - Prob. 47ACh. 40 - Solve each of the following problems using the...Ch. 40 - Prob. 49ACh. 40 - Prob. 50ACh. 40 - Prob. 51ACh. 40 - Prob. 52ACh. 40 - Substitute the given numbers for letters in the...Ch. 40 - Substitute the given numbers for letters in the...Ch. 40 - Substitute the given numbers for letters in the...Ch. 40 - Substitute the given numbers for letters in the...Ch. 40 - Substitute the given numbers for letters in the...Ch. 40 - Substitute the given numbers for letters in the...Ch. 40 - Substitute the given numbers for letters in the...Ch. 40 - Substitute the given numbers for letters in the...Ch. 40 - Substitute the given numbers for letters in the...Ch. 40 - Substitute the given numbers for letters in the...
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- Dr Fogg is quoted the following market prices VT for T-year unit zero-coupon bonds as well as the fair forward rate V3 = 0.95 and V9 = 0.7 f3.5 = 4%. (a) Determine the spot rate $3. Enter your answer as a percentage correct to 3 significant digits. Answer: (b) Answer: (c) Answer: (d) Determine the spot rate s9. Enter your answer as a percentage correct to 3 significant digits. Find the fair forward rate f3,9. Enter your answer as a percentage correct to 3 significant digits. Dr Fogg wants to sign a forward contract to buy 20kg of tea in 5 years' time. The current price of tea is £2.7 per kg. Find the fair forward price of this contract. Enter your answer correct to the nearest penny. Answer:arrow_forwardSuppose that the price S(t) in year t of stocks of Bancroft & Sons is modelled by a stochastic process which has a risk-neutral distribution at time t = 3 given by £120 with probability 0.3, S(3): = £140 with probability 0.5, £160 with probability 0.2. Assume that interest is compounded continuously at nominal rate 2%. (a) Assuming no-arbitrage, determine the current price S(0) of Bancroft & Sons stock. Enter your answer correct to the nearest pound. Answer: (b) Determine the no-arbitrage price of a European put option on Bancroft & Sons stock with strike 150 and expiry 3 years. Enter your answer correct to the nearest pound. Answer:arrow_forwardA 2-year bond with face value £300,000 is redeemable at half-par and has semi-annual coupons paid at annual rate 4%. Suppose that interest is compounded quarterly at nominal rate 3%. (a) Answer: What is the amount of the first payment? (b) What is the amount of the last payment? Answer: (c) Determine the no-arbitrage price of the bond. Enter your answer correct to the nearest pound. Answer: (d) Determine the duration of the cash flow generated by the bond. Enter your answer correct to 3 significant digits. Answer:arrow_forward
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