Amount in account after 3 years. Non Annual Compounding: When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

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Answer 1

Question

Chapter 5, Problem 36P

a.

Summary Introduction

To calculate: Amount in account after 3 years.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

b.

Summary Introduction

To calculate: Two amounts required to make a payment of $4,000 on two equal quarterly deposits in a bank that pays 6% interest rate.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

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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.

Answer 2

Question

Chapter 5, Problem 36P

a.

Summary Introduction

To calculate: Amount in account after 3 years.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

b.

Summary Introduction

To calculate: Two amounts required to make a payment of $4,000 on two equal quarterly deposits in a bank that pays 6% interest rate.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

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Answer 3

Question

Chapter 5, Problem 36P

a.

Summary Introduction

To calculate: Amount in account after 3 years.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

b.

Summary Introduction

To calculate: Two amounts required to make a payment of $4,000 on two equal quarterly deposits in a bank that pays 6% interest rate.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

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Answer 4

Question

Chapter 5, Problem 36P

a.

Summary Introduction

To calculate: Amount in account after 3 years.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

b.

Summary Introduction

To calculate: Two amounts required to make a payment of $4,000 on two equal quarterly deposits in a bank that pays 6% interest rate.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

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Answer 5

Chapter 5, Problem 36P

a.

Summary Introduction

To calculate: Amount in account after 3 years.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

b.

Summary Introduction

To calculate: Two amounts required to make a payment of $4,000 on two equal quarterly deposits in a bank that pays 6% interest rate.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

Answer 6

Chapter 5, Problem 36P

a.

Summary Introduction

To calculate: Amount in account after 3 years.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

Answer 7

Chapter 5, Problem 36P

a.

Summary Introduction

To calculate: Amount in account after 3 years.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

Answer 8

b.

Summary Introduction

To calculate: Two amounts required to make a payment of $4,000 on two equal quarterly deposits in a bank that pays 6% interest rate.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

Answer 9

b.

Summary Introduction

To calculate: Two amounts required to make a payment of $4,000 on two equal quarterly deposits in a bank that pays 6% interest rate.

Non Annual Compounding:

When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 5 - Prob. 1Q Ch. 5 - Explain whether the following statement is true or...Ch. 5 - If a firms earnings per share grew from 1 to 2...Ch. 5 - Would you rather have a savings account that pays...Ch. 5 - Prob. 5Q Ch. 5 - Prob. 6Q Ch. 5 - Banks and other lenders are required to disclose a...Ch. 5 - Prob. 8Q Ch. 5 - Prob. 1P Ch. 5 - PRESENT VALUE What is the present value of a...

Amount in account after 3 years. Non Annual Compounding: When the cash flow compounding occurs more than one time in a year than interest rate is divided by number of time compounding occurs in a year. Number of year when multiplied by number of compounding in a year we get compounding period.

Solution Summary: The author explains that the future value of cash flow is 5,468.41.

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Chapter 5 Solutions