Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 1. you will be paying $10,000 a year in tuition ex

1. You will be paying $10,000 a year in tuition expenses at the end of...

90.2K

Verified Solution

Question

Finance

1. You will be paying $10,000 a year in tuition expenses at the end of the next 2 years. Bonds currently yield 8%.

a What is the present value and duration of your obligation?

b What maturity and face value of zero-coupon bond would immunize your obligation? Hint: you answer is based on part a.

c You buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. What happens to your net position, that is, the difference between the present value of the zero-coupon bond and that of your tuition obligation? Hint: interest rate change affects both asset and obligation.

d What if rates fall to 7%? Is your portfolio immunized from interest rate risk?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Essential Statistics for the Behavioral Sciences. Second Edition Chapter 9, #20: A study evaluating the effects...

Statistics
Q

Which spectroscopy is more sensitive: fluorescence or absorption? Why? (2) Between fluorescence and phosphorescence: which one has...

Chemistry
Q

Essay on the topic “Against Empathy”: Rhetorical analysis and response (800-1000 words) Against Empathy Paul Bloom, psychologist and...

Psychology
Q

The Monty Hall problem is named for its similarity to the Let's Make a Deal television...

Basic Math
Q

Lab Assignment Part B - Recurrence Intervals Data from the chart below was collected at the USGS...

Advance Math
Q

lows the computer to connect to a network O Modem O Switch O Network interface...

Biology
Q

Lisa is playing a game of chance in which she tosses a dart into a...

Basic Math
Q

Textra produces parts for a machine manufacturer Parts go through two departments Molding and Trimming...

Basic Math
Q

Given f(x) = (2/5)X -3 determine f^-1(x). f^-1(x) = (5/2)(x+3)f^-1(x) =(5/2)x+3f^-1(x) = -(2/5)(x-3) f^-1(x)= -(5/2)x-1

Basic Math
Q

For a function to be even which of the following must be correct 1 a...

Algebra
Q

5 2 20 pts Using the rule of similar triangles solve for the missing sides...

Algebra
Q

Time value Personal Finance Problem As part of your financial planning, you wish to purchase...

Finance