A company must pay liabilities of 3000 and 5000 at the end of years 2 and...
A company must pay liabilities of 3000 and 5000 at the end of years 2 and 4, respectively. The only investments available to the company are thre following two zero - coupons bonds : 1) maturity 2 years, effective annual yield 5.5%, par 1000. 2) maturity 4 years, effective annual yield 6.8%, par 100. Find the cost of exactly matching those liabilities.
Homework Answers
The company must invest the present values of 3000 in 2 years at 5.5% and 5000 in 4 years at 6.8%.
The cost is given by= 3000/(1.055^2) + 5000/(1.068^2) = 2695.36 + 4383.57 = 7078.93
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A company must pay liabilities of 3000 and 5000 at the end of
years 2 and...
A Company has liabilities that require payments of 2000 six months from now and 3000 one...
A Company has liabilities that require payments of 2000 six months from now and 3000 one year from now. The following investments are available to the company: Maturity Effective Yield Par Value Coupon Rate (years) (semi-annual) (semi-annual) 5% 6% 0.5 6.00% 8.00% 1000 1000 Calculate the amount of each bond to purchase and the total cost of the bonds needed to match the liability cash flows exactly
Company ABC has liabilities of 20,000, 50,000, and 70,000 due at the end of years 1, 2, and 3 respectively. The company would like to exactly match these liabilities using the following assets: A one-...
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a) The price of a 4-year zero coupon government bond is 79.81. What is the yield...
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5a FYI bonds have a par value of $1,000. The bonds pay an 8% annual coupon...
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A Company has liabilities that require payments of 2000 six months from now and 3000 one year from now. The following investments are available to the company: Maturity Effective Yield Par Value Coupon Rate (years) (semi-annual) (semi-annual) 5% 6% 0.5 6.00% 8.00% 1000 1000 Calculate the amount of each bond to purchase and the total cost of the bonds needed to match the liability cash flows exactly
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